China Needs Venture Capital, Not the World Bank – Carl Pope

From China Dialogue:

Clinton asked Zoellick what the bank’s role was in enabling poor countries to develop and expand access to electricity and energy services by providing them with options other than fossil fuels, and Zoellick simply wouldn’t answer the question. Clinton clearly understood that without a new development paradigm, China and India, Africa and Latin America will simply not be able to commit to avoiding worldwide climate catastrophe. But Zoellick appeared unprepared to engage on this issue.

What is really needed to enable China (and countries like India, Brazil and Mexico) to leap-frog the carbon-based first-world energy model directly into an economy powered by sustainable energy technologies, is not merchant banking – the World Bank’s basic model – but venture capital. Venture capital’s business model is very different. With venture capital, the assumption is that the value-added is not cheap access to credit, but combined access to credit and a sophisticated support structure. It is assumed that many projects will fail: the “repayment” rate is low. Venture capital looks for risky, but high-return, investments. They then invest a lot of time and energy in helping those investments not only succeed, but also take off. And take off is what the sectors in India and China need to do. [Full Text]

November 17, 2007 6:52 PM
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Categories: Economy