NGOs Discover Ups, Downs of Private Business

For almost seven years, doctors from the Cambodia Ophthalm­ologist Association would venture from their offices in Phnom Penh to the provinces every month to perform free eye examinations. For weeks at a time, the doctors would work late into evening examining poor rural villagers for blindness and prescribing eyeglasses—in many cases supplying those glasses free of charge. Hundreds would line up for the free exams.

But COA has reduced their trips in recent months. Although doctors from COA continue to visit rural areas, the duration of the trips and the number of examinations has been scaled back because of budget concerns and, surprisingly, their own business responsibilities.

Those obligations started in 1998, when COA reached what many NGOs aspire to become: a self-managed, self-financed NGO that has nearly complete independence. A handful of other NGOs in Cambodia have em­barked on the same path, supplementing part of their operating costs with revenues from products or services they sell.

But while evolving into a self-sufficient organization is the goal for many NGOs, that goal has its disadvantages, as Horn Piseth, COA’s director, can attest.

When COA became relatively independent in 1998, they started taking on paying clients in their Phnom Penh office to offset the costs of rent, communication expenses, salaries for the 10 staff members and basic administrative payments.

COA now sees approximately 10 to 15 clients a day, and gives free examinations to four or five of those clients. Poor villagers from Battambang and Kompong Cham provinces now trek to COA’s Phnom Penh office for free glasses and tests.

“Our goal [has always been to] go to the provinces and do free examinations for the poverty stricken areas,” Horn Piseth said. “Now we don’t go outside [Phnom Penh] so much. We go for a couple of days a month.”

This reduction of services is a problem for many NGOs that receive at least a portion of the budgets from self-generated revenues.

Steven Sharp, country representative for PACT Cambodia, an organization that provides money for various NGOs in Cambodia, said NGOs such as COA face two issues. First, they need to look at whether they have the staff capacity to generate these revenues. Second, they need the marketing ability to generate these revenues.

“These NGOs face the problem of having to be out there everyday, searching for revenues,” Sharp said. “A lot of Cambodian NGOs, in the training field at least, don’t have a lot of experience in marketing.”

Currently, eight of the 16 NGOs PACT Cambodia works with generate some income from selling a service or product, Sharp said. He knows of a few other NGOs in Cambodia that receive some money through selling a product or service to the public. This is a small number compared to the numerous NGOs throughout Cambodia.

Don Boring, program officer with the Mekong Project Development Facility, a project managed by the private sector arm of the World Bank, agreed with Sharp that NGOs which gain some revenues from selling a service or product face many hurdles.

“The private sector is greatly competitive, and a lot of times NGOs create situations that are unnatural and not sustainable when the a parent NGO leaves [or stops funding],” Boring said.

While Boring applauds the NGOs that have attempted to gain revenues off privatization, he said basic ideological differences hinder the organizations from fully succeeding. For example, he said, if an employee at a business does not produce, then they will most likely be fired. But if an employee at an NGO does not produce, they will probably remain on staff.

“Business is not kind, it’s competitive, and the NGO community has traditionally been kind, generous and well-meaning,” he said.

When many NGOs first came to Cambodia in 1989, their main agenda was relief, not development. This too affects how they view moving into self-sufficiency, Boring said. Although the NGOs very quickly started moving into the development sector, the initial groups that first came into Cambodia set the tone for humanitarian work in Cambodia by not making autocracy an objective.

Although the goal of many NGOs is to create a project that can support itself, Boring doesn’t believe real steps have been taken to ensure that. “The goal can’t be self-sufficiency,” Boring said. “If an NGO becomes completely self sufficient they are aware [the parent NGO] will lose their job—this may be cynical, but it’s the nature of the development community.”

Despite these problems, there are a handful of organizations that have succeeded.

SCALE is a small fish hatchery that sits on 16 hectares of land in Kandal province. Since 1991, SCALE has grown Chinese and Indian carp, silver barbs and eight other “food fish” raised for human consumption. When SCALE first started, it sold their minnows for a small fee to subsistent farmers who would then grow the fish to maturation.

In recent years, SCALE has begun selling their fish on the commercial market. They have done so well that they currently sell only 20 percent of their fry to local farmers and 80 percent to commercial fisheries and restaurants.

Ka Ming, an advisor at SCALE, said that although a bulk of their budget comes from larger NGOs such as South East Asian Outreach and various religious organizations, they raised $25,000 in earnings last year. By March 2002, when their donor funding runs out, SCALE will become completely self sufficient, Ka Ming said.

“Fish sales are just going up up up,” Ka Ming said.

One way SCALE has avoided the problem of marketing is by having someone else do it. Ka Ming said he has worked in the past with a local produce supplier who sells produce and meats to many restaurants and hotels in Cambodia. This relationship has helped SCALE become, as Ka Ming said, “autonomous.”

Perhaps the largest NGO bringing in sales revenue is Population Services International (PSI), an international group that sells condoms and birth control pills to more than 47 countries worldwide. PSI distributes condoms at more than 7,000 outlets, runs countless radio and magazine advertisements and employees 53 women to package 75,000 condoms and 360 boxes of birth control pills. PSI sells a four-pack of Number One condoms for 200 riel (around $0.05).

But John Deidrick, PSI’s country representative, said the NGO isn’t in this business for profit.

“We make about $4,000 a month in revenues, but our annual budget is around $1 million, so the monthly revenues couldn’t sustain our project,” Deidrick said.

Unlike SCALE, which has succeeded in self-sufficiency, and COA which was forced into it by lack of funding, Deidrick said they have no intention of becoming an independent NGO that relies on revenues to support itself.

According to Deidrick, PSI practices “social marketing.” The idea in this approach is that once someone buys a condom, they have a sense of ownership over the condom, and that makes it more valuable to them and therefore they are more likely to use it.

Complete self-sufficiency is not part of PSI’s goals or mandate, said Deidrick, who questions whether that is the best course of action for an NGO.

“I don’t think an NGO should move entirely into privatization because they may start to have conflicts with their real goal: humanitarian work,” he said.

 

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