Swiss-American Chamber of Commerce in Zurich

His Highness the Aga Khan. AKDN / Gary Otte

I would like to begin by expressing my appreciation of the opportunity you have given me today to speak in this important city of Europe. The business and financial institutions of Zurich have made it one of the great symbols of private initiative in the industrial world, and I am happy to be able to address you on a subject which extends the horizons of individual enterprise to the developing world.

Many people have a somewhat enigmatic image of the Aga Khan, and a rather hazy idea of the Ismaili Muslim Community. In order for you to understand more clearly the purpose and framework of my involvement in various fields of private initiative, let me outline briefly the background of the Community which I lead and the office which I hold.

Islam, like the Protestants and Catholics in Christianity, is divided into two major branches: the Sunni and the Shia.

The Sunni Muslims are by far the more numerous. The Shia of which the Ismailis are a part tend to be concentrated in the non-Arab countries and, with the exception of Iran, are rarely in the majority.

Thus the Ismaili Community is a minority of the population in every country, Muslim or otherwise, where it lives and this is no doubt one of the reasons why private initiative has always played such an important role in my community.

Soon after the Founder of Islam, Prophet Mohammed, died, issues concerning the religious and secular leadership of the Muslim Community arose. By and large, the Sunni Muslims maintained that after Prophet Mohammed’s death each Muslim was left to interpret and practice his faith according to his understanding although every Mosque has its own Imam to lead the prayers. The Shia Muslims, on the other hand, believe that the successor to the leadership of the Muslim Community both in spiritual and temporal matters was the Prophet’s cousin and son-in-law, Ali, and that this leadership was to continue thereafter by heredity through Ali in the Prophet’s family.

Like any hereditary institution, the Shia Muslim Imamat has been subjected to the strains and stresses of family rivalry, hostile external pressures and the vagaries of time, and the Ismailis are today one of the few Shia sects led by a hereditary Imam.

Seen against the background of Christian religious tradition, it might appear incongruous that a Muslim religious leader should be so involved in material and mundane matters of this world. It is not an Islamic belief, however, that spiritual life should be totally isolated from our more material everyday activities. The nature of the religious office which I hold neither requires nor is expected by the members of my Community, to be an institution whose existence is restricted to spiritual leadership. On the contrary, history and the correct interpretation of the Imamat require that the Imam, while caring first of all for the spiritual well being of his people, should also be continuously concerned with their safety and their material progress. It is about my work in this latter field that I address you today.

The Ismailis live mainly in Africa, Asia and the Middle East and consequently it is with the countries of these areas that the Imam is primarily concerned and to which I will mainly refer. In some of them, foreign private initiative has suffered all the slings and arrows of nationalisation, denationalisation and renationalisation. It has been managed and mismanaged, taxed beyond reason, expropriated and confiscated. Without forewarning staff localisation has been imposed, control of investments weakened, the status of companies altered, land and buildings taken over, trade preferences rescinded, dividends and interest withheld. Worse still, private enterprise has sometimes had to contend with country-wide chaos or civil war or invasion.

Elsewhere, private initiative, both local and foreign, has found outstanding wisdom and statesmanship as well as evolving political institutions which have consistently respected the role and interests of private enterprise. Foreign investments have received constitutional protection and a panoply of other incentives: high returns for small capital exposure, labour regulations written to ensure output, localisation imposed with consideration, modernisation has been possible without confrontation, education and medicine have expanded, without erosion of standards, law and order, and individual human rights have been upheld.

Many of you, like myself, have been working for the past 20 years in this climate of extremes. The challenging question is: what is the role, and what are the true interests and responsibilities of private initiative in today’s situation in the developing countries?

In your Western world, time and experience have equipped you with political and financial institutions and an immense body of law which have become a framework within which private enterprise makes a major contribution to your progress without harming the interests of the nation as a collective whole. In the developing world, a substantial part of private enterprise is either overtly or covertly foreign controlled which automatically makes it a matter for caution by local governments. Much of the sizeable and indigenous enterprise that exists has been developed over a short period of time and, all too often, with the fear that one day a wave of political instability will sweep everything away. Even when this has not occurred, local private enterprise has tended to grow in the hands of a very small number of people with a maze of interlocking operations and more and more undesirable characteristics.

Thus it seems to me that both foreign and indigenous private enterprise in developing countries should pay particular attention to the delicacy of their situation. Free enterprise will only survive if individual corporate self-discipline replaces the rule of long established law and accepted business practice. This, of course, is equally as true of social institutions as it is for business ventures: many philanthropic organisations, foundations and trusts have lost their existence due to questionable involvement in political or sectarian affairs.

The past 20 years have shown a growing trend towards making all forms of private initiative indigenous. More and more, developing countries have sought to strengthen their independence through total control of the key areas affecting their national life, and I have no doubt that this trend will continue and, indeed, accelerate in the future. Whatever the motivation of this trend, the problems of foreign investment are certainly more understandable to the West now that various petro-dollar nations are seeking to invest in some of the most powerful and sensitive private corporations of the industrial world. The point I wish to make today, however, is that private initiative, and especially foreign private initiative, can only expect to survive in developing countries if it recognises the true dynamics of their national independence.

If independence means the option to choose, then bilateralism or a special “favoured nation” relationship with the former colonising country is a matter increasingly of the past. Thus private initiative – and especially foreign private initiative – is going to have to search for political acceptability through genuine international effort. Bringing together what private initiative has to offer of the best from various countries has many attractive aspects to developing countries but also I suggest to promoters: individual financial risk is reduced, the sources from which to draw qualified manpower are multiplied and political acceptability is increased manifold. Indeed, it would seem to me that these advantages outweigh many of the evident management problems which may follow. Finally, and this is no doubt the most important point, the fate of private initiative channelled through international effort is infinitely less exposed to the ups-and-downs of individual bilateral political relationships.

Since assuming the responsibility of the Ismaili Imamat, I have been involved with a number of international development projects and I would like to mention two of them today.

In 1957, Kenya was still a British colony and it appeared to me important that the country should have a responsible press of its own as early as possible. I therefore decided to enter the publishing field in association with the best newspapers in the free world who would join with me in this exciting if risky idea. I was fortunate to be able to associate, in our initial launching of the project, the London Sunday Times, the Canadian Toronto Globe and Mail and the Times of Ceylon. In those days, the only newspaper in existence in Kenya was strictly colonial, written by and for the white minority of the country. We started publishing both in English and Swahili, later on even in Luganda, the local language of most of Uganda, and we deliberately set out to voice the national viewpoints of the still unborn East African countries. To sustain this venture financially, we attached to it a commercial printing and packaging industry. Today, Nation Printers and Publishers is one of the biggest free newspaper and publishing groups in independent black Africa and its voice is regarded by newspapers around the world as a reliable reflection of African political thinking expressed by Africans in a country which has permitted a degree of press freedom unusual in developing nations. The timely creation of a national press through private initiative in Kenya may well have helped to make it possible for the Kenya Government to maintain a free press, one of the rare exceptions in developing countries. Once financial success has been achieved, we put a substantial part of the shareholding at the disposal of the public through the medium of the Nairobi Stock Market. Today there are some 4,000 individual shareholders, the great majority of whom are African. Here then is an example of foreign enterprise completing a full circle: first it introduced modern newspaper production techniques for a product in great demand by people on the brink of independence. Then it established itself, not without difficulty, as a major national institution, staffed and managed almost entirely by local people. Finally, it became sufficiently profitable to be launched as a public company with a substantial African shareholding and thus an integral part of indigenous free enterprise.

The second international effort, this one more recent, which I would like to refer to today was conceived as a regional Tourism Development programme to operate in the East African Common Market of Kenya, Tanzania and Uganda. The programme has to be shelved in Uganda and Tanzania due to circumstances beyond our control and thereby lost its regional framework, but in Kenya progress was good and today our own development and financial institutions have been joined by Lufthansa, British Airways, East African Airways, the Intercontinental Hotel Corporation, Avis, the Kenya Tourism Development Corporation and the World Bank’s International Finance Corporation in completing the development of one of the largest chains of hotels and lodges in the country.

If the international approach to new development is one which we have used with some success, it should not be forgotten that when my grandfather died in 1957, I inherited a long history of self-help and private initiative. Many financial institutions launched with the funds form my grandfather’s widely remembered Jubilees, and ranging from financing houses to insurance companies to hospitals, had to be adapted to the dynamics of independence in the developing world. For years the Diamond Jubilee Investment Trust operating throughout East Africa had provided extremely soft long-term loans to housing cooperatives, thus enabling almost all the poorer Ismaili families in that area to acquire an apartment or a house of their own. Once this task had been completed, I decided to transform the institution into a modern finance house and to put its shares on the Nairobi Stock Market. Thus a national institution was created with thousands of shareholders, many of whom are African. Similarly, our insurance companies in Pakistan and East Africa founded by my grandfather from the Jubilee funds to promote family security in my Community, have been modernised and expanded and now fulfil many of the more important national needs. Today the vast majority of policy holders are indigenous. What were once small Community enterprises have now become national institutions.

However, as the process of decolonisation gathered speed and the impact on my Community became clearer, it was patently evident that adjusting our existing institutions to the dynamics of independence would not be sufficient to meet our new and often unsuspected requirements. We therefore decided to take a new approach to the promotion of development through the creation of a group of development corporations called Industrial Promotion Services or simply I.P.S. These companies, an important one of which operates from Switzerland, presently exist in seven countries, and between them they have launched some one hundred enterprises in areas where my followers live. I.P.S. not only invests in such ventures but provides the whole range of services which is needed to map out new industries and to monitor their continued success. They usually work in association with other private investors – both foreign and local – as well as with Government, parastatal and international statutory bodies. Their main aim is to marry technological expertise with local know-how under the umbrella of a financial consortium suitable for the specific project involved. I.P.S. projects today cover everything from textiles to tourism and have heavily contributed to the substitution of imports, the promotion of exports from developing countries and the generation of foreign funds. As a general rule, I.P.S. mobilises for its projects from foreign, local or governmental parties, five times its own investment. Thus they are true generators of development and investment in developing areas.

Every developing country I know has been faced with the choice of planning for mass progress at slow speed or selective progress at high speed. No doubt each case must be judged on its merits, but it seems to me that private initiative has a particularly important role to play in setting, maintaining and improving national standards. Whether it be in medicine, education or industry and commerce, quality is expensive but it is as essential to the long-term future of developing countries as it is to the wealthier parts of the world. The search for quality, because it is selective, will inevitably provoke envy, but unless key sectors in the developing countries are allowed to seek the highest standards and remunerate manpower accordingly, I can see no other solution to the vital need to build up a reservoir of national skill. Our developing countries must recognise this and, although selectivity in the search for progress may be politically unappealing, the alternatives is an indefinite commitment to mediocrity and thereby to stagnation.

This is why during the past 20 years immense effort has gone into the development of good Ismaili educational institutions in Africa and Asia from nursery schools, through college and on to teacher training. Education, however, is one if the more sensitive fields for private initiative as it is often thought to be a means of propagating religious or political views. If private schools are in a unique position to aim for and maintain a true excellence of educational standards, the pressure on third world governments to broaden the base of their school systems is also tremendous and it is almost inevitable that private schools are called upon to integrate with the national system. When this occurs, it nearly always leads to a decline in teaching standards. In Africa, in the 1950s, it was clear that the traditional role of Ismailis as small traders and shopkeepers would meet fierce competition from indigenous African people, and in order to resolve the problem, education was given the highest priority, including encouraging a large number of Ismaili students to attend overseas universities. This was not done simply to prepare them for harder times ahead, but to expand their career prospects into the professions and industry and also enable them to make a greater contribution to the task of nation building when their countries did achieve independence. Our expenditure on education expanded rapidly as more and more Africans took advantage of the facilities which our schools offered them. Uganda failed to benefit from this source of educated manpower when President Amin decided to expel everyone of Asian origin from his country almost overnight, but we had good reason to be thankful for the efforts which had been made in our schools. Hundreds of young Ismailis were now academically qualified to start entirely new lives in distant corners of the globe, and to support their families who were often unequipped to settle elsewhere.

If education is unfortunately a sensitive area for private initiative, medicine raises many less questions. Platitude thought it may be, it is nonetheless true that little progress can be achieved with widespread ill health, and as a result we have devoted an immense amount of time, effort, and money to developing our own medical institutions. Today we are running hospitals in Bombay, Dar es Salaam, Nairobi, Mombasa and Kisumu and are building a major 600 bed teaching hospital in Karachi. All these hospitals are designed to act as central referral points for minor medical units which are widely spread to provide medical services to the remotest parts of each country. In Pakistan, for example, we have 72 such health centres and, as and when it becomes necessary, these units are upgraded to provide obstetric and minor surgical services. An interesting aspect of this work is that the development of these units and the level of service that they provide is discussed in detail with the national governments so as to be properly integrated into the overall National Health Programmes. This also applies to preventive medicine which is particularly well suited to the joint effort of private initiative, government collaboration and assistance from international agencies. With the help of the Government of Pakistan and supplies from UNICEF, we have recently been able to send teams of volunteer doctors and nurses into the remotest parts of the Himalayas to immunise the people living there against polio, cholera, smallpox and tuberculosis.

While political cooperation is more forthcoming in medicine than in education, the management of private medical institutions in developing countries is considerably more complex. It has taken us years to develop the know-how to prevent our institutions and programmes from becoming an unreasonable financial burden. Much of the management required is provided by the Aga Khan Foundation in Switzerland and its branches abroad.

I have attempted today to give you an outline of some of the experiences we have had and some of the conclusions which we have drawn from our private initiative in the developing countries. Some of our efforts have been successful but we, like many others, have also had to face setbacks and failures. In Burma, in the 1960s, and Uganda and Bangladesh more recently, we have had to suffer heavy losses in all the fields which I have mentioned to you today. In other areas where we have substantial programmes, even the slightest change in political orientation could expose us to all sorts of difficulties.

I believe that there is much which private initiative can do to improve its acceptability to developing nations such as adapting to the dynamics of independence, maintaining a high level of discipline and integrity in enterprise, pooling means and know-how through international effort, maintaining outstanding professional standards, particularly in the social services, but when all is said and done, it is first and above all else, up to the governments of developing countries to recognise that they can never – now nor at any time in the future – be a total substitute for the individual private initiative which they have at their disposal locally and abroad. The meaning of independence is questionable if it is to be synonymous with a process which goes: first the localisation of all foreign private enterprise, second the elimination of private enterprise altogether, third awareness, too late and without the means for reversal, that government has burdened itself with enterprises which is incapable of running successfully and, finally, confronting the people with losses instead of profit, high taxes instead of relief and lower quality of services instead of improvements. Several Western countries around us today, even, supported as they are by large experienced bureaucracies and immense revenue from the taxation of national wealth, are groaning under the burden of deficitary nationalised industries and I fail to see how developing nations can expect to resolve these problems more successfully. Only time will tell if private initiative is to be given the role which I believe it must have for the benefit of the developing countries themselves. However, I think I may be right in detecting among those that I know, a growing awareness of these realities.