Social Equity Venture Fund - Essay Example

Suzana Zdravkovska 11 August 2008 S.E.VEN (Social Equity Venture Fund) Your Excellency, many people like to call you "The Entrepreneur President",and I would say rightfully since you seem to have fully understood Albert Einstein's words "An empty stomach is not a good political advisor". Entrepreneurship is the solution to ending poverty and empty stomachs in Rwanda, because entrepreneurship is making business work for the poor. People in Rwanda deserve better life and prosperity, which Michael Fairbanks defines as "the ability of an individual, group or notion to provide shelter, nutrition, and other material goods that enable people to live a good life, according to their own definition", (Harrison, E. Lawrence and Huntington, P. Samuel, Editors, "Culture Matters: How Values Shape Human Progress", 2000, Basic Books, New York, NY, ISBN: 0-465-03175-7, Part VII Promoting Change, Fairbanks, Michael, Chapter 20, "Changing the Mind of a Nation: Elements in a Process for Creating Prosperity", p. 269, or 270). Fairbanks is one of the Co-Founders of S.E.VEN which is a philanthropic foundation run by entrepreneurs whose aim is to increase the rate of diffusion of enterprise solutions to global poverty by producing films, books and original research, and we shouldn't neglect his views and advices. Nevertheless, as your political advisor, allow me to present my ideas and recommendations to you concerning entrepreneurship and a few of the most relevant policies in the sphere of economics. First of all, and the most important thing for the people of Rwanda is that we have an entrepreneurial spirit, which is the only thing most developing countries have in common. All other things, all sought and possibly found solutions do not fit all developing countries. Each of these countries' governments should make their own best choice. Since Rwanda is mostly a rural environment, I'd suggest we start encouraging entrepreneurs in establishing their small businesses in the area of agriculture, especially honey production. The figures show that national demand for honey was 1,625 tons in 2006. This demand will increase to 13,789 tons by 2020. We have the capacity and good conditions for organic honey production, which is preferred all over the world. We have to stimulate entrepreneurs to invest in capacity building and organization of beekeepers, meaning replacing old traditional beehives that collect about 7 kg each with new modern ones that collect about 20 kg each. This will result in attaining self- sufficiency for honey, even excess amount of honey meant for sale on international markets and of course creating new job positions. I dare suggest beekeepers be given subventions of 30 EUR per beehive. Furthermore in regards to agriculture, I suggest entrepreneurs invest in construction of many small factories all around the country (where fruits and vegetables are raised) for processing and preserving of the biggest part of the produced vegetables and fruits, again not only for domestic markets but meant for export, too, not forgetting of course modernization and mechanization of the farms, and reminding specialized import-export companies of the importance of modern fertilizers, whose use unfortunately is underdeveloped in this country. Another major and I'd say leading government foreign exchange source is export of coffee and tea. In order to increase this foreign exchange we also must have entrepreneurs who will clearly understand the importance of constructing modern coffee production capacities. This agricultural, sectoral policy is in close correlation with all of the rest of the policies like the trade policy, wage policy, fiscal and monetary policy, and of course direct foreign investment policy. The first and very important goal of monetary policy is high GNP and low unemployment. Society wants the output of newly produced goods and services to equal productive capacity, or, in other words, actual GNP should equal potential GNP. High GNP is associated with high employment. To achieve this goal (high GNP and low unemployment) entrepreneurs have to think about the factors of production (labor, capital and land). All of these must be acquired by the entrepreneur who transforms the factors of production into goods and services (Meyer, A. Paul, Department of Economics, University of Maryland, 1982, "Monetary Economics and Financial Markets", chapter 1, ISBN 0-256-02615-7, p.2). Agricultural policy and the above suggestions in regards to it can help and contribute a lot to achieve high GNP and low unemployment, thus achieving the second goal - stable prices or at least a constant and predictable rate of inflation, "if the exact path of a tornado were certain, tornadoes would cause virtually no damage. No one knowingly builds in the path of a tornado. However, unexpected inflation is more devastating than tornadoes", (Meyer, A. Paul, Department of Economics, University of Maryland, 1982, "Monetary Economics and Financial Markets", chapter 1, ISBN 0-256-02615-7, p.2). Entrepreneurs who will achieve efficient expansion of productive capacity in any area of agriculture will help achieving high rate of growth of output, and since efficient expansion occurs when saving increases and investors earn a high rate of return, consequently, the resources for firms' investment freed by higher saving and lower consumption should flow to investors or entrepreneurs who earn the highest rate of return. This again, brings me to the trade policy and policies to stabilize export prices or earnings. One good mechanism to achieve stabilization of the prices that the individual suppliers of agricultural products actually receive would be the use of domestic marketing boards. But then again this would bring us to setting up a government monopoly agency that will purchase the goods from the individual farmers at a guaranteed price, then sell it on the world market at world market prices, which is not your idea of entrepreneurship. Another mechanism that guarantees greater stability in less developed countries' exports is an international export quota agreement (Appleyard, R. Dennis, Davidson College and Field. Jr., J. Alfred, University of North Carolina at Chapel Hill, "International Economics" Second Edition, 1995, ISBN 0-256-14365-X, Part IV, Trade Policy, Chapter 11, p.356). Let me explain this further. If as one of the world's producing countries of organic honey we choose a target price for the honey at 7.00 EUR per kg and then make a thorough research on the world's demand for the coming year, we should consequently determine the quantity of honey that will yield the target price based on the estimated world demand. If the estimated quantity of honey demand is correct and all supplying countries adhere to their quotas, the price in the coming year will be at the target level. This mechanism, or (if you prefer it more that way) policy to stabilize export prices applies to entrepreneurs, too, as they can compete for getting these quotas severely. Just as an illustration of trade policy in the EU that eliminated import quotas long ago on trade between member states but imposed by individual members on imports from outside the EU from time to time, let me present you with an example of a bitter trade dispute of the EU with the USA and various Latin American countries over bananas. "The conflict centers on the EU's granting preferential access to its markets to certain banana-producing countries. Not surprisingly, other banana producers object to this. The extract below, taken from the Financial Times of 18 March 1997, shows that the "banana war" was showing no signs of coming to an end. African, Caribbean and Pacific countries risk economic ruin if the European Union is forced to withdraw preferential access for their banana exports, the European Commission has warned. The prediction is part of the Commission's latest offensive to defend the EU's controversial banana regime, which gives ACP banana producers duty-free access. The arrangement has been challenged by the US in the WTO. The US challenge is a test case for the preferential trade terms the EU offers ACP countries under the Lom convention. Although the Lom special access arrangements were granted a waiver under the GATT in 1994, the US has maintained that the waiver was never intended to cover the EU banana regime. The US says the regime is rigged to protect EU companies at the expense of Latin American groups. In addition, it says the arrangement does not benefit Lom countries but has a negative impact on the economic and trade interests of Latin American producers. Washington cites as evidence the fact that the regulations have cut access of producers in Latin America to the EU by 27 per cent. In blunt defense of the preferential terms, the Commission argues that banana export earnings are a 'critical component' of the economies of the ACP countries. 'The destruction of the Caribbean banana industry world provoke severe economic hardship and political instability in a region already struggling against deprivation,' says a Commission document. The Commission points out that economies of scale and lower wage cost have driven down the cost of banana production in Latin America, making it impossible for smaller producers in the Caribbean to compete. The Commission dismisses the contention that EU companies are benefiting at the expense of US and Latin American groups, pointing out that Del Monte and Dole, both US companies, have increased EU market share." (Sloman, John and Sutcliffe, Mark, University of the West of Englan, "Economics for Bussiness", Prentice Hall Europe, Hertfordshire,1998, ISBN : 0-13-356254-9, Chapter 24, Trading Blocks, p.433) Entrepreneurs do not necessarily run only small firms. However, most of them start the lives of the firms as small ones and then strive to become big. Firms are considered small if they have a small market share; if they are managed by their owners and shouldn't involve a formalized management structure and if they are not parts of larger business organizations and can make their own decisions. While they are small firms they face many difficulties but with proper management by their owners, they succeed to overcome the difficulties even become specialist producers thus creating and developing a wealthy enterprise culture, which is your primary goal on behalf of the people of Rwanda and their welfare and prosperity. Beehive specialized entrepreneurs, for example, will probably be more able to meet customers' (beekeepers') requirements and needs than many larger companies throughout the world. They will avoid waste, they will try to lower costs and improve quality by employing hard-working and motivated laborers for whom they will also provide a good training in order to improve the workers' skills. The more skilled the workers, the better beehives they'll get. Surely, entrepreneurs should consider good wages for their beehive constructors' wages. Although wages are more or less market determined, i.e. by the interaction of the market demand and supply of labor, wages beehive or vegetable growing entrepreneurs should not pay low wages, that is, below living standards. They mustn't either discriminate workers on the grounds of race, ethnicity, age or sex/gender. Economic discrimination should be also penalized should it happen. Here comes the question what is the role of Government in regards to all activities an entrepreneur does or does not undertake. The Government should adopt good policies (and strict rules and penalties for disobeying these rules) towards research, technology development, training, environment protection, taxation, social welfare, trade, etc., maybe following examples of other developing countries that have also been war-torn, like the countries from the Balkans for example. Macedonia has proved that unleashed entrepreneurship gives solid even excellent results. Finally my last recommendation would be the following: the Government should invest on its part in education and technology development, thus giving a helping hand to young and motivated entrepreneurs to achieve something more for themselves and the community as well. Your Excellency, invest in computers for each child in schools so that they can turn into progressive young people to follow your steps. MLA formatted: The Purdue OWL. 26 Aug. 2008. The Writing Lab and OWL at Purdue and Purdue University. 23 April 2008 . Sources: 1. Harrison, E. Lawrence and Huntington, P. Samuel, Editors, "Culture Matters: How Values Shape Human Progress", 2000, Basic Books, New York, NY, ISBN: 0-465-03175-7, Part VII Promoting Change, Fairbanks, Michael, Chapter 20, "Changing the Mind of a Nation: Elements in a Process for Creating Prosperity", p. 269, or 270 2. Meyer, A. Paul, Department of Economics, University of Maryland, 1982, "Monetary Economics and Financial Markets", chapter 1, ISBN 0-256-02615-7, p.2 3. Appleyard, R. Dennis, Davidson College and Field. Jr., J. Alfred, University of North Carolina at Chapel Hill, "International Economics" Second Edition, 1995, ISBN 0-256-14365-X, Part IV, Trade Policy, Chapter 11, p.356 4. Sloman, John and Sutcliffe, Mark, University of the West of England, "Economics for Bussiness", Prentice Hall Europe, Hertfordshire,1998, ISBN : 0-13-356254-9, Chapter 24, Trading Blocks, p.433 Read More