London, U.K.

Lord Denman, Sir Micheal, Your Excellency, Excellencies, Members of the Royal For Asian Affairs, Distinguished Guests,

Your kind words, Lord Denman, are much appreciated. Asia is fortunate to have as an advocate a person of your rich experience in India, the Middle East and elsewhere.

I am aware that my position as hereditary Imam provokes constant queries form commentators in Europe. They remind me of the aristocrat talking about his long family history who was finally challenged at a dinner party with the words "I suppose your ancestors were in the Ark with Noah, too." "No" he replied calmly, "actually they had their own boat."

It is a great pleasure for me to meet this evening with the members of this august Society. But I confess that it is a rather daunting prospect for me to follow my respected colleague, the honourable Lynda Chalker, as speaker at your annual dinner. Mrs. Chalker and Douglas Hurd have done so much in the past year to articulate the importance of "good government" in the development of the Third world. I believe that "good government" is crucial to what I refer to as the enabling environment for development.

Tonight I should like to sound the theme of what I believe is another prerequisite for development and to end my comments with a coda regarding ways the West can help in this process. But I shall resist the temptation literally to sing for my supper. That would result in a horrible cacophony and a prompt end to our evening.

As members of the society know better than I, more than half the world's people live in Asia. Despite the television images of desperation in Africa, three out of four of the really poor ---800 million people -- live in Asia. They subsist on one dollar a day or less. Yet Asia is, generally, a continent of hope. Country after country has been creating an enabling environment, to release the creativity and energies of its peoples.

Guangzhou province and Indonesia are perhaps the most striking additions to the ranks of the Asian Tigers. But I am also impressed by the courage of governments in the large countries of South Asia. Particularly India and Pakistan are making unprecedented changes in policy. These may prove to be as important in tackling poverty as those in South Korea in 1961.

We must not, of course, forget the challenges. In the last three months, the Asian community of nations has grown by eight. These central Asian republics face an especially difficult future. Many other Asian countries are struggling with the tradition from authoritarian or military regimes towards a civil society. Poverty, the status of women, environmental degradation and human rights remain vital concerns across the continent.

This brings me to my theme for the evening: Good governance and the civil society. With dramatic force, the last two years have shown the world that the civil society is more than the unitary state. Rather, civil society is properly recognised to be a pluralist collection of the groups, associations and localities in which we actually spend our lives.

Many developing countries are moving in this second direction. I applaud their courage, as I am convinced this is the way forward. Development is ultimately about people about enabling them to participate fully in the process and to make informed choices and decisions on their futures.

I believe this requires a creative and supportive partnership between government, private enterprise, and the voluntary sector ; the myriad of voluntary associations and non-governmental organisations. Government should provide the rules of the game for the enabling environment--- the legislative and policy framework. It should also invest in people and infrastructure to the extent that resources permit. The business sector is the principal engine of growth to create those resources. And the voluntary sector can serve to bring people together to meet an enormous range of social needs.

But this second path is difficult. Life was easier, certainly for ruling groups, when governments alone were expected to be responsible for production and employment and for the full range of social welfare with no questions asked. Now there are many more actors on the scene. They often have differing objectives and perceptions. And they aren't easy to control. Harnessing these energies and opportunities is arguably the hardest challenge facing developing countries.

Perhaps at this point I should pause for a moment to tell you a bit about the Ismaili community. It is as leader of the Ismailis that I have been working in development for the last 30 years, and I shall want to draw on those experiences to support my thesis about good governance.

The Ismailis have a history that spans 1400 years. As many of you know they belong to the Shia Muslim Community, one of the two major branches of Islam, the Sunni being the other. The Sunni hold that there was no designated successor to the leadership of the Muslim community after the death of Prophet Muhammad. The Shia believe that, although revelation ceased at the Prophet's death, the need for the community's spiritual and temporal guidance continued. The authority for this guidance devolved first on Ali, the Prophet's cousin and son-in-law, and subsequently passed to those male descendants designated in turn. The Ismailis are one of a number of Shia Muslim persuasions that grew out of the issue of succession. My responsibilities as a descendant and as the present Imam of the Ismailis concern not only interpretation in matters of faith to a broad diversity of people residing in more than 25 countries, but also relating that faith to the conditions of the present. One cannot address the present conditions of the Third World without becoming deeply involved in development.

But let me return to the main theme of the talk. To create a pluralistic, civil society, private institutions must be established that meet needs of their constituent groups. The state cannot to it all. To be successful, these private institutions must meet two conditions: their members must have a sense of common purpose; and those members must be organised so as to achieve that purpose. Good governance involves both this common purpose and this effective organisation. Moreover good governance is likely to be achieved only by organisations nurtured by an enabling environment, where the laws of the state encourage private enterprise, diversity of initiatives, and voluntary not-for-profit organisations.

It certainly seems clear that the governance form of the monopolistic, parastatal corporation is not conducive to effective development. Yet this form has been prevalent in most of Africa and much of Asia. Over the last few years, major efforts have been made to privatise these dinosaurs in many countries. But, what alternative forms of governance are likely to provide the highest probability of success?

Effective organisation has several elements that can be illustrated by experiences in the Aga Khan Development Network, a collection of institution-building programmes that include education, health, housing, culture and economic development mostly in Asia and Africa. These elements include defining the institution's mission; setting strategic directions; mobilising the necessary resources; money, to be sure, but even more important, trained people; and being accountable for results.

The Aga Khan Network is fortunate to be associated with excellent companies in South Asia, as well as in both East and West Africa. The Aga Khan Fund for Economic Development has helped to foster industrial projects, tourism, financial institutions and venture-capital companies. AKFED is designed to take a long view of the prospects of the companies with which it is involved. It takes equity positions in these companies, rather than providing loans. It plays an active role in helping to strengthen the governance of these companies. Particular attention is paid to the composition of the boards of directors. An effective board can see a company through crises and ensure orderly succession of leadership. The boards are composed almost entirely of nationals, selected because of the strategic directions and linkages they can proved. The typical company has a majority of external directors, so that management is fully accountable.

The contribution of good governance to the success of private enterprise is recognised, too, by the World Bank's International Finance Corporation and the Commonwealth Development Corporation, both active partners of AKFED.

Experiences with the Aga Khan Health Services and Education Services show that these same principles of good governance apply to the voluntary sector as well as private enterprise. Health and education services are offered in areas where Ismailis reside but to all people in the area, regardless of religion. Depending on the site, the population served ranges from 97.5% non- Ismaili to 85% Ismaili. Regardless of the site, the services rely heavily on volunteers, from seasoned professionals to young people moved by the ethic of helping others. By building locally based institution with volunteer directors and professional staff, The Aga Khan Network will ensure that by 1995 --- five years before the World Health Organisation's "Health for all by the year 2000"--- all Ismailis living in countries where the network operates will have access to primary health care. This includes all urban communities as well as the most isolated villages in Hunza and Chitral, Gujarat and Andhra Pradesh. Providing this access a has cost of one pound per person per year for Ismailis and non-Ismailis alike. By the year 2000, I expect 55% of these populations will have access to medical diagnosis and treatment, that is secondary care, either directly or by referral. By that time specialised, tertiary care will be offered in Bombay, Karachi, Nairobi and Dar es Salaam.

In educations, all Ismaili children and their neighbours, boys and girls, now have access to primary education, whether they live in the cities or the countryside. By the end of the century at least 80% will have access to secondary education.

Of course the Aga Khan Network is only one example of a burgeoning voluntary sector in Asia. Most of you will be familiar with the extraordinary work done by NGOs in such countries as India, Bangladesh and the Philippines.

In Pakistan, believed by some not to have a strong voluntary tradition , the Aga Khan Foundation has been strengthening the management capabilities of NGOs. It started work in a slum district of south Karachi with a population 300,000. Much to its surprise the foundation found 63 registered NGOs, all local in impetus, already operation in the area.

The sheer size of the voluntary sector gives it an immense potential to empower people, and to work for social change. This potential is being enhanced by donor agencies and Britain's Overseas development adminstration is certainly amongst the world's leaders.

In south Asia, we find a number of NGOs that are among the most efficient and effective institutions in the region. But these are set among many thousands that are ineffectual, moribund, or worse. The Bangladesh Rural Advancement Committee , for example, has reached 12 million homes with health education messages on diarrhoea. It runs 4,000 non-formal schools that Jim Grant of UNICEF has described as the most exciting educational innovation in the world today. BRAC plans to add another 40,000 schools to cover the country. It is my conviction that transforming the perception of rural people about their destiny in rural areas is one of the most critical development needs if we are to slow down the destructive rush to urbanisation I wish that the Aga Khan Development Network has started earlier than the late 1960's to work on rural development. If we had, the situation of rural peoples in the areas where we now work might have been considerably better than it is.

The Aga Khan Rural Support Programme now reaches nearly one million people scattered over an area the size of Ireland, dominated by the highest mountains in the world. It provides a package of social organisation and services to improve production and incomes. Participants in the programme have how accumulated 3 million pounds in savings, providing capital and power. The village organisations are now reaching out to protect their environment, and to establish, and largely pay for schools and medical centres. The World Bank conducted an independent evaluation of the AKRSP which Lord Denman and his colleagues visited in 1990. The Bank singled out AKRSP's flexibility, responsiveness and ability to change directions. It also found value in the governance techniques that AKRSP used in creating village organisations.

What distinguishes the outstanding NGOs from the other? A key factor seems to be governance. The successful NGOs have effective boards to work with management on defining the mission, strategic directions and objectives. Management is held accountable for results. The right balance seems to have been struck between local autonomy and effective oversight. Risks are consciously evaluated, and a prudent equilibrium established between the need for social innovation and the danger of failure. The composition of the boards helps to draw in useful and supportive allies.

As we look at the challenges and opportunities facing Asia today, the importance of harnessing the energies of half of mankind cannot be exaggerated. Political change in Central Asia contributes to both those challenges and those opportunities.

Areas previously inaccessible to the western world and to religious organisations are now opening up. The Aga Khan Development Network is prepared to extend its work into the central Asian republics of the former Soviet Union as well as to Afghanistan and China where their are significant Ismaili populations. The lessons learned about good governance elsewhere will be critical to that new work, but so too will be understanding of the needs for development in the areas of culture and rural life.The network has in fact already been working in these areas. The Aga Khan Trust for Culture has sponsored the Samarkand Architectural Competition which is seen by the Uzbeks and us as a means for attracting economic development of Samarkand. Likewise, restoration of the Baltit Fort in Hunza or the Stone Town in Zanzibar is a commitment not just to culture but to development.

Whether the vehicle is culture or private enterprise, heath or education, to meet he development needs of Asia over the coming decades will require good governance and a civil society. Integral to the creation of good governance, as I have tried to suggest this evening, is the establishment of indigenous non-governmental institutions, custom-made to solve local problems. And the success of those institutions requires both the mobilisation of the populace to address its own needs and structures to ensure the self-sustainability of those institutions in terms of finances human resources and succession of leadership. Asia needs good governance and good governance implies institution building, people mobilisation, and self-sustainability.

Now the coda. If local needs are best solved locally, what role can the West play in fostering development in the Third World? Encouraging good government is clearly one way, for that creates the enabling environment. But how can outsiders foster good governance? Donors have been gratifyingly quick to come forward with aid to support specific projects of fledgling voluntary institutions in developing countries. These funds, and accompanying expertise, have enabled those institutions to do more sooner than would otherwise have been possible. But as those institutions mature-- and they must mature if they are to be self-sustaining-- donors would do well to shift the form of their support from project-specific grants to the creation of a permanent flow of resources under local control.

The building of endowments would allow the governing bodies of these institutions to continue to supplement local self -help funds , but would clearly put decision-making and accountability where it must be for long term success-with the local voluntary organisation itself. Such an initiative from the West would also set an example of philanthropy to local industries and would encourage local governments to pass legislation to encourage donations.

Now, my Lords, Ladies and Gentlemen, may I ask you to join me in a toast to a fine example of a voluntary organisation, properly nurtured and fully mature. I give you the Royal Society for Asian Affairs.

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