Speech to Business for Social Responsibility, New York

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Speech by J. Ramos-Horta (*) at the Annual Meeting of CEOs and members of Business for Social Responsibility (BSR), New York, N. Y.

Ladies and gentlemen,
I’m most grateful to BSR senior management and staff for enabling my long journey from Timor-Leste to be here today. It was a long 30hr flight from Timor-Leste, arriving in New York only a few hours ago. So pls accept my apologies for what might not be an inspiring speech.

I and many others in my coutry who have guided our people from colonial servitude, occupation and humiliation to freedom, realizing the impossible dream, we are called the “Founding Fathers” of Independence. This means, in practical terms, that we have some relevant experience in nation-building, state-building, healing and reconciliation and peace-making. We have some experience in delivering services, the expected fruits of freedom of independence. We have seen all, up-close. We have learned from our own mistakes and shortcomings as well as from the very poor record of the hundreds of “experts” who have descended on us since the early days and months following liberation in 1999.

It has been estimated that at least some 3,000 expert studies have been done on us, making us certainly one of the most psychoanalyzed people on Earth. We should know a few things about how to heal the wounds in divided communities and countries, how to reconcile and build lasting peace, and how to deliver to the poor the fruits of freedom, such as clean water, electricity, schools, health-care, roads, food security.

We learned that long-lasting sustainable peace can only be attained through social innovation, fostering partnerships between government, civil society, communities and business. Ten years ago we started literally from ashes. Much has been achieved since then, namely in:

State building & Political sustainability – deriving from the peace-building process through a patient journey on national reconciliation and the building and strengthening of key national institutions, public administration, courts, laws and legal system, a goverment that is elected by the people in actively contested, free and peaceful elections, a strong parliament that adopts laws, overseas the executive branch, etc. But we also thoroughly reconciled with our largest and mighty neighbor, the Republic of Indonesia, and as friends and neighbors we walked the long walk of building viable democracies and sustainable economies since the end of the dictatorship in 1998-99.

The ever Merciful God, in His Divine Goodness, decided that the Timorese people should have an additional bonus on our independence in 2002. He gave us some modest amount of oil and gas to feed the poor and power the growth of our economy for some decades until we are able to be less reliant on finite fossil fuels for our survival. But the ever Good God also gave us also some wisdom to negotiate a win-win arrangement with Australia, one of our two closest neighbors, in revenue-sharing of the Timor Sea resources.

Initially, Australia, being a giant of a county with greater needs, seemed to sincerely believe that it should own all or most of the oil from the Timor Sea. But with the benevolence and wisdom bestowed on us by God we managed to change the situation around and in 2002 our two countries signed the Timor Sea Treaty giving Timor-Leste 90% of the revenues.

And what should we do with this God-given bonus? Learning from the sad stories of many fellow oil and mineral resource-rich countries where people still live in abject poverty as elites squander the revenues, where legions of poor live next door to extreme, ostentatious opulence, we decided to be different, to manage our modest revenues with integrity, transparency and wisdom so as to serve the cause of the poor, of the disfranchised of our society.

So we set up by Law a Petroleum Fund in 2005 that was modelled on Norway’s sovereign wealth fund to ensure the sustainable use of its revenues over the long term, avoid waste and corruption. In less than 10 years saved revenues from our Petroleum Fund topped US$11 billion in October 2012.

UNDP Human Development Index for Timor-Leste has improved 22% since 2007. The Human Development Index (HDI) for Timor-Leste in 2011 was 0.495, with a rank of 147 out of 187 countries. The HDI combines life expectancy, education (school enrolment) and gross national income (GNI) to produce a composite measure of human development.

Economic growth – Since 2007, Timor‐Leste has seen double-digit growth yearly, for five years now, and I believe the next five years will see the country transformed.

Despite the many achievements that we are proud of, there are still many challenges ahead of us. Timor-Leste is blessed with oil and gas reserves but it is still one of the least developed countries in the world with 40% of our people living below the poverty line with 0,88 USD a day. Currently our dependency on oil and gas revenues is enormous.

For instance, national budget – the Petroleum Fund pays for most spending (89%). Only a small proportion of spending is paid for by other domestic revenues.

Our Petroleum Fund was worth 10.8 billion dollars on 31.08.2012 (source Central Bank website). It is a great help to kick start our economy and build the much needed roads, electricity for all, clean water and sanitation facilities, etc.

However, going forward we cannot rely alone on oil and gas revenues to achieve sustainable development.

Sustainable development requires building a strong local economy that is less dependent on oil and gas revenues. At the moment our imports are high and exports very low. In 2010, Timor-Leste exported $16 million (coffee) and imported $298 million. 

The majority of the population is still living in a subsistence economy and struggling to have adequate nutrition, access to proper education and health care. To build a sustainable local economy Timor-Leste needs to create employment and self-employment opportunities for our young population; unleash their potential. We are a young nation with a very young population. However, at this point employment opportunities are low for the number of youngsters entering the job market every year.

The median age in Timor-Leste is 19 yrs old (TL census 2010); in the USA the median age is yrs 37 (USA Census 2010); 40% of our population is between 0 yrs and 14yrs (Census 2010);

Business opportunities in Timor‐Leste are plentiful. Most consumer goods are imported but many imported products can be produced in‐country. The private sector however is at best in a nascent stage, and focused on a narrow range of industries.

The overall ease of doing business in Timor‐Leste has improved according to the World Bank in 2012, though the country remains a risky place to invest. Timor-Leste’s ranking of 168 out of a possible 183 countries is attributed to “gaps in land law, land and property registration, leasing and collateral, bankruptcy, licensing, accounting and auditing, competition policy, intellectual property rights, social security, and key sectoral legislation in areas of tourism, manufacturing and trade”.

Without inclusive economic growth social peace will always be in jeopardy. Social innovation is needed to ensure long lasting and sustainable peace in our young nation. This can be achieved through an investment in Social Business and Micro Businesses that walk side by side with the government development plans and the public investments that will be launched at the national level in terms of infrastructures (roads, electricity, water, deep water port, etc).

But to achieve this, it is not enough to copy examples from other countries. Social innovation is paramount to allow us to achieve inclusive growth. Social innovation is “a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals” (Phills, Deiglmeier & Miller’s definition in Stanford Social Innovation Review).

MICRO BUSINESSES AND SOCIAL BUSINESS
In 2010 Timor-Leste imported USD 300 million in goods. With many of these products able to be produced locally, there are many business opportunities for the 40% of the population living on less than 0.88 cents per day. To create jobs for our young and largely unemployed population we must have our own industries so that we do not need to import so many foreign products. We need to start producing local products that Timorese want to buy instead of foreign ones – local products made to good quality standards and at affordable prices. Often these opportunities may not be attractive to larger businesses, as profit margins may be smaller. But equally these opportunities may have the potential to deliver large social benefits to communities. Micro businesses and social businesses can then play this vital role.

Let me share with you, Ladies and Gentlemen, a story of two young Portuguese idealists and dreamers, Filipe and Ariana, who in 2009 decided to leave a highly successful legal practice in the UK, a very comfortable life, and moved to Timor-Leste and set up the Empresa Diak – the Good Businness.

Timor-Leste is an amazingly beautiful and young country blessed with petroleum reserves, the best coffee in the world, pristine landscape and beaches, best diving and best preserved Corals, with at least 300 Coral species, and 700 species of fish, abundant, rich marine life. But peace and development depend on providing jobs and business opportunities for our largely unemployed population, particularly the Youth.

Empreza Di´ak (ED) means Good Business. In 2010 its founders decided to leave their well paid private sector jobs in Europe to pursue the dream of using their private sector skills to unleash entrepreneurism and the innovative positive power of social business (profit + social impact) to help Timorese to get out of the poverty trap. They decided to invest 15 thousand USD and work for free for a year to start ED. Since then ED has grown:

(1) ED now supports 3.000 people through 25 grassroots organizations members of ED’s Good Business Forum, which provides support via a Social Business Incubator and Social Business Clinics.

(2) ED’s social businesses – that include dry fish, salt, algae, vegetables, women bags and dolls, rubber and construction materials – are documented to provide an increase of income between 100% to 300% and they will cover 450 beneficiaries (plus their families) until the end of the year.

(3) ED is working with all shelters for vulnerable women (victims of sexual abuse and domestic violence) in Timor-Leste, supporting them to start businesses that will economic empower them so that they will be able to break away from the violence cycle.

(4) ED does not believe in giving poor people a fish; but they believe in teaching them how to fish, sell the fish and use the profits to get a bigger boat and sell more fish! This is only possible with the encouragement and participation of ED’s individual and institutional members and supporters from across de world.

(5) Empreza Diak is looking to increase the number of its individual (35 usd per year) and corporate members (250 USD per year) as well as to develop partnership with international companies and business people

(6) Empreza Diak is looking for social business investors willing to support and finance social business ventures. Whereas in charity one gives 100 USD to a cause, in Social Business one gives 100 usd and then receives it back in a specific period of time. And those 100 USD can be used again for another social responsibility initiative.

My favorite hero the great teacher Mahatma Ghandi once said “poverty is the worst form of violence”. ED is fighting poverty, changing lives and helping building the much needed Peace in Timor-Leste. Micro business Empresa Diak’s market research reveals that many of the imported goods can be produced locally to generate income for impoverished communities.

Developing sustainable micro-business provides an opportunity for Timorese people to fight poverty and build peace. ED work with the poorest communities, focusing on products that they are already producing for self-sustainability. ED’s value-added is to then provide enhancements and innovations to their production and marketing, including market access, and scale, enabling them to move beyond self-sustainability.

They have developed systems that work across a range of locally produced goods (dried fish, salt, algae, rubber, coffee).

SOCIAL BUSINESS
Social Business is a new dimension for capitalism that can truly transform lives and that is booming all over the world, according to the Nobel Peace Prize laureate Professor Yunus. A social business has to be about overcoming poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society, and not about profit maximization.

Social Businesses are financial and economically sustainable, are environmentally conscious and their workforce gets market wage with better working condition. The original concept of Social Business was a private company that would pay back its original investment to the donors/investors and reinvest its profits in innovations or further growth that would advance its social goals.

Professor Yunnus believes that two types of Social Businesses have developed: (i) the original no profit, no loss companies focused on fighting poverty, which pursue the guiding principles mentioned above, but also (ii) for-profit business companies owned by the poor or their community and dedicated to a social cause.
The Social Business model has been tested and implemented and there are many exciting examples of successful ongoing Social Businesses. ED believes that there is a strong need for Social Business in Timor-Leste as there is currently little local economic activity that is not related to the oil and gas extraction or the “bubble” caused by the presence of highly paid internationals in the territory.

“POVERTY ALLEVIATION AS A BUSINESS”
Can poor people make a business with goods and services that are relevant for poverty alleviation? The answer is Yes!
To make it happen, markets should be created and technologies must be validated, tested and introduced. If a critical mass of demand is created, small private enterprises will emerge to respond to these new business opportunities. This approach focuses on the creation of a market for products which are useful to the poor and allow them to get out of the poverty trap.

Consequently, the focus is not ” export marketing ” or ” fair trade ” but how products such as trees, treadle pumps, rope pumps, maize silos, roofing tiles and latrines can make a difference to the poor. In this sense, it is a ” product ” approach.

Marketing is used to achieve large-scale dissemination and a big reach-out. The market creation approach to development is a strategy which combines two aims: 1 .) To supply to poor people useful and affordable products with a high poverty alleviation impact and 2.) To create a viable business as a private delivery channel, preferably run by poor people.

Definition: The market creation approach to development is a process that exploits a previously unrecognized vast gap in the market place by designing or identifying products which achieve breakthroughs in affordability and are capable of increasing the income and productivity of poor customers significantly. These products are made available to large numbers of poor people through targeted effective mass marketing strategie.

In Timor-Leste – NGO Empreza Di’ak is developing social businesses and micro businesse. Empreza Di’ak” means “Good Company”. Their team is doing ground breaking work and is changing lives.

What they do is simple and it works. Empreza Diak works with the poorest communities, focusing on products already being produced for self-sustainability. Their value-add is to provide enhancements and innovations to their production and marketing, including market access and scale, to enable the communities to move beyond self-sustainability. Their great team is drawn mostly from the private sector and is highly committed to achieving real and long-lasting results. Their work is improving lives and building better futures in Timor-Leste.

They have developed systems for a range of locally made products,namely dried fish, salt, algae, rubber and coffee. The Ikan Diak/good fish example! Empreza Di’ak is working with over 300 fishermen that produce dried fish, assisting them to increase their production. They provide equipment and training to produce good quality dried fish that can be sold at the local markets and to local institutions. On average, the fishermen’s weekly income has increased from US$7 per week to US$ 82.50 per week.

Ladies and gentlemen, this is the story of my country, and the story of how two dedicated young persons (both are lawyers and they prove that there are some good people among the lawyers), how they inspire others in the country and make a real difference.

I came from very far. I hope that a benefit I derive from this forum is that some of you feel motivated to be part of Empresa Diak, either as an innovative thinker and help the group further, or invest a few million dollars with the group to expand their outreach in the noble fight against the scourge of poverty.

May God, the Almighty and the Merciful, Bless You All, and your loved ones, family and friends.

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