Speech at the IPS Luncheon Dacca - 1970-01-29
Speech by His Royal Highness The Aga Khan at the IPS Luncheon, Dacca on January 29, 1970 'May I first thank the Director of IPS for giving me further practice in the digestive art of delivering a speech in the middle of the day after a substantial luncheon. If you promise not to fall asleep. I will do my best to keep talking.
Seriously, however, this is a proud occasion for me. As the youngest of the various organisations and institutions which are associated with my family and the Ismaili Community, I follow the fortunes of IPS in different parts of the world with the closest attention. IPS began here in Pakistan partly as a result of requests from friends and acquaintances who had heard of IPS achievements in other countries. Its origin everywhere has steemed from my concern substantiated by research, that in Africa and Asia, it is fundamental that industrialisation should be stimulated and that the industrial base should not only increase in volume of business, but in the number of entrepreneurs actively involved. While the basic problems were the same as in most developing countries, such as the very restricted size of capital markets and the lake of any depth or momentum in industrial development, the problem that had to be faced at the inception of IPS (Pakistan) six years ago was somewhat different: there was no lack of industrial activity, but the base was a very narrow one indeed. It was not so much a question of a shortage of capital as a shortage of men, willing and able to enter the industrial field. Of those that were available, only a very small number had the experience to put together the appropriate management teams to launch new, well-conceived and well-planned ventures. There was, therefore an obvious need for some organisation to show these new entrepreneurs how to go about creating new industrial enterprises and obtaining the right order the basic ingredients for success. these consisted of market research, technical know-how, financial forecasting, cash flow statements, and using these tools in such a way that the whole process from conception to full production is completed on a well-planned basis. This, essentially, is IPS's most important function. It is more than just a middle-man between the aspiring industrialist and the Banks, which may or may not be prepared to lend him money. IPS will actually participate in the management that has to be done and, like most development corporations, often take a share of the equality risk as well. There was a fashion once, for a rather ruthless school of thought on the subject of learning to swim. These people maintained that if you simply picked up a child (the smaller the better) and threw it in at the deep end of the swimming pool, its natural instincts would always enable it to survive. Thank goodness no one has ever been permitted to try this on me right now, particularly after this luncheon, I would sink like a stone. In IPS we adopt the opposite school of thought We accept a moral responsibility first to seek out the people who want to learn to swim, and then to jump in with them, at least to keep their heads above water during the formative years. In other words, our main emphasis is on promotion. We put projects together on paper and then seek out the promoters, giving special preference to those people who are new in the industrial field and because we are interested in dealing efficiently with novice entrepreneurs, we have to remain a great deal more flexible than the conventional development corporation. The range of activities IPS is prepared to engage in is very wide indeed. It has no rigid rules about the proportions of loan and equity investments which it makes. Finally, it is prepared- and indeed, anxious-to co-operate with other development institutions, both from the Government and the private sector. Through its sister Companies IPS has access to a wide variety of industrial, banking and technical contacts. It is, therefore, in an advantageous position to select the most appropriate partners and financiers with a specialised knowledge applicable to each project. This is essential to maximise the returns to the promoters. A large number of development agencies established in the developing nations are created by state corporations from the developed countries, who in many instances are in effect seeking to accelerate their own industrial exports. IPS is free from such commitments and can afford to pick and choose from all over world with no strings attached. Just as IPS is natural in the sense that it has no large blocks foreign state-owned shares, equally it has no financial links with manufacturers of industrial equipment. IPS- in contrast to some manufacturers who involve themselves in industrial promotion and thereby hope to sell more of their own products- has no such vested interests. An example of IPS action will shortly be announced in East Africa where, through its tourist subsidiary Tourist Promotion Services Limited, IPS has brought together several major Airlines, an international hotel chain, and other important private interests, to form what will become the largest single tourist consortium in Africa, with a chain of hotels and game lodges stretching throughout Kenya, Tanzania and Uganda. IPS has done this with active participation of the World Bank through its subsidiary agency, the International Finance Corporation, and the development corporations of the three Governments involved. Thus local Government funds local private funds, as well as foreign capital and know -how have all been harnessed in one project to develop further one of the key sectors of the East African economies. Similarly , in Tunisia, IPS was invited-more in a consultative capacity than had been the case in East Africa- to advise and join with a number of interested parties (once again including World Bank's International Finance Corporation) in promoting new and much more sophisticated concepts of tourism in Tunisia. No doubt this invitation had its origins in the experience which the IPS Companies had already gained in East Africa, and from other experience gained in Sardinia. It is my very sincere hope that soon in Pakistan a concerted and systematic effort will be made to develop the field of tourism and IPS (Pakistan) would willingly assist in the development of this high employment and high foreign exchange earner. Not only should this program be conceived on a national basis but also, I suggest, within the context of the R.C.D. The IPS Companies have one other characteristic which makes them somewhat unusual in the developing world. I have always urged IPS Directors to insist that those projects in which they engage in should be really well-conceived and efficiently planned. It is worth spending a great deal of money on initial research if this leads new products on to the market in the right quantities, at the right time and place, and at the right price. This is where IPS's consultative role is important. There are , of course , many other agencies besides IPS, and I hope that the private and public sectors will make increasing use of them, because the majority of industrial failures in the developing world are directly attributable to misconception, ill-assorted equipment, and bad planning from the outset. This does indeed lead us to the conclusion that we should equip our new factories with very modern and highly productive machinery. I know that to some people, it may appear rather extravagant that a factory in the heart of Asia or Africa should equip itself with machinery that is as good and as expensive-as anything you will find in the United States, Europe or Russia. Wouldn't it be wiser, some people might ask, to begin with something cheaper, even if the end product is not quite of such a high standard! Generally speaking my reply would be 'No'. One advantage of starting with nothing, as Germany and Japan have discovered since the last war, is that you are uncluttered by the past. Traditional methods of management, machine manning division of crafts and feudalistic labour relations can go by the board. I t is possible to build completely afresh, with the best tools and the best advice the world as a whole has to offer-and as you will know, there is never any shortage of advice. This is just about the only way of facing the problem of the ever accelerating rate of obsolescence of industrial management technique and equipment. In Pakistan today, your industries live in a protected environment. Some of these protections will be necessary for a long time to come but the very large incentives in the form of tax rebates, bonus vouchers, etc. Which are given to new industries can not continue for ever. No Government can afford them indefinitely. Most IPS projects are, therefore, built on the assumption that sooner or later their products must face much stiffer competition. Time will prove, I think, that this is the right policy. It is fundamental for Pakistan's economy that more and more of its industries should become internationally competitive, and it should be able to offer its products to the international market in free competition.
To those who wonder why IPS Pakistan shares are at a modest discount on the market, I will simply counsel --- have patience. The whole concept of IPS inclines against the quick slice profit maker. The moral obligation I have described of participating in the risks of the entrepreneur from conception to full production, the difficult early years of training and preparation -- these can not and should not produce an immediate reward. Nor do I expect our strong emphasis on quality and modernity to help in this respect since our initial capital out lay is often correspondingly high.
It is, therefore, true to say that with IPS we are digging deeper for our crock of gold, but when we find it, the benefit should be long lasting, no t only to ourselves and our financial partners, but to the growing economy of Pakistan. And because our policies are long term and seek no quick rewards, I sincerely hope that your Board's appeal for kinder treatment from the tax collector, Mr. Chairman, will succeed in melting those traditionally stony hearts.
Before committing myself to this speech, I had a quick look at the list of guests to be invited and soon realized that they were a group of people who knew a great deal more about industrial promotion in developing areas than I do. So I will content myself with making this simple appeal to all of you: Please help us to make IPS what it has always sought to be a truly national institution which is prepared to assist any authentic industrial promoter, regardless of what part of the country he hails from, what sect he gives his allegiance to, or what language he speaks.
I deliberately made IPS a Public Company to be quoted on the Pakistan Stock Exchange to show every one that although its origins may have been Ismaili, its objectives are very definitely national. In the years ahead, with your help, I hope to see more and more Banks, Insurance Companies, Government agencies and private individuals prepared to accept IPS in this role and giving its project partners all the assistance they required.
In doing this, they may be confident that these new Companies will be well planed and well managed; and that they will be making a material contribution to the growth of the National economy and to the number of different people engaged in it.
Source Ismaili Mirror Special Edition 1970.