Business associations and chambers of commerce have a unique and important role to play in building democratic systems.  They are the voice of business, advocating business needs and concerns and solutions to problems to the government, community leaders, the media, and the general public.  No one knows better what is good for business than a business person, and then business people together can be more effective in effecting change than one alone. This is the foundation upon which chambers of commerce are built.

Chambers of commerce are uniquely positioned to address some of the pressing needs of business communities. Issues of corruption and corporate governance remain at the top of the business agenda in countries across the globe because bad governance and widespread corruption reduce competitiveness, divert investments, limit productive potential of companies, and impose additional costs of doing business. While it is diffcult for individual companies to systematically address these problems, which stem from weak institutional environments, chambers can be more effective in mobilizing the resources and knowledge to effect change.
Chambers of commerce and other types of professional business associations play a pivotal role in building a foundation for sustainable economic development.  That role stems from their ability to unite the business community around a set of common issues, identify key problems, develop solutions, advocate for change, and monitor implementation. Through such a process of private sector advocacy, chambers of commerce not only improve economic regulations, they also strengthen participatory democratic institutions. Highlighting this link between democratic and economic development is crucial in that it is impossible to build a functioning market economy in an environment where business is barred from participation in policy design and implementation.

Many countries increasingly recognize the role that the private sector plays in ful?lling national ambitions of sustained economic growth.  During the past several decades, private capital ?ows have replaced government to government assistance as a major source of capital in emerging and developing markets, and today it can be safely said that the development models that rely on states as the sole providers of income, jobs, and investment are no longer valid.  Instead, countries increasingly turn to the business community as the engine of sustained economic growth and prosperity.  Even many of the closed nations recognize these trends and seek ways to attract private capital.  The question no longer asks who will shape and de?ne economic growth, but rather: how can one unleash the potential of the private sector, integrate it into development models, and capitalize on its resources? The answers to this question lie within the private sector-based theory of economic growth.

This theory has brought to the forefront many issues that have rede?ned the way governments, business, and civil society approach development.  But the most important contribution, perhaps, has been the emphasis placed on the framework of government and business relationships.

Emphasizing private sector advocacy, private sector economic development models have shown that a grassroots approach to reform must be implemented before ambitions of sustained economic growth are realized.  In the same way, this economic theory is also giving rise to the concept of business leadership – the ability of the business community not only to work with government to address various development concerns but also to lead the reform initiatives.  

The business-government relationship model has evolved dramatically over the past several decades, as many countries have struggled to de?ne their own founding blocks of a prosperous market economy.  Command-style economies, where business simply responds to government reform initiatives and is barred from participating in policymaking, have proven to be ineffective in creating a viable private sector that can endure fair competition or participate in the global economy.  This has been demonstrated by the fall of the Soviet Union and the state of disarray that rules the remaining command-style economies. Similarly, crony or relationship market economies, where only a few insider ? rms have unchecked access to policymakers and enjoy favorable rules and treatment, have also failed to bring sustained economic bene?ts to markets and countries, as evidenced by a string of ?nancial crises that have exposed the dangers of relationship capitalism in the late 1990s. However, among the failures of some countries and economic success of others, one model has proven to be the most effective in generating economic growth:  the model of a participatory economic system. In this model, business participates in the creation and implementation of economic policies and does not simply react to regulations produced behind closed doors or behave as a puppet in the hands of government offcials.

Building Effective Chambers based on Power Chambers Model

Although the section above illustrates the role of chambers within the national and global economic framework and in democratic decision-making, there is another aspect of chambers’ role that we must consider.  In addition to being the drivers of economic change and instruments of democratic process, chambers also need to ful?ll their organizational role by serving the interests of their members in an effective manner.

Mistakenly, many view these challenges as two separate issues, but the two are part of the same equation.  They both focus on creating effective chambers of commerce that build a better environment for doing business – an environment where business (chamber members) is not overburdened by opaque regulations; where it has access to policymakers; where there are opportunities to grow, engage in productive activities, and attract investment; and where it can effectively voice its concerns and offers suggestions.

Role of Special Membership Organizations in FPCCI is to provide chambers Standard Operating Procedures (SOPs) for Following:

Internal capacity building – Before chambers attempt to fulfil their role, they have to build internal capacity in consultation with special membership organizations.  The first step of this process for the chambers is to understand their mission and objectives.  

Further, in order to address the needs of their members and advocate effectively on their behalf and contribute to an overall policy process in their countries, chambers have to be functional organizations, which means that they must have knowledgeable staff, implement good governance mechanisms, commit to transparent financial practices, and create a strategic plan with key priorities to address.

Access to information – In order to be effective, chambers have to become a source of information for their members, policymakers, and the rest of the society in consultation with special membership organizations.  

Entrenched interests benefit from tight control over information, yet markets cannot function and regulations cannot effectively address the real needs of the business community when economic information is unavailable or distorted.  

Chambers often have a unique opportunity to become sources of economic information because they frequently have direct access to it through their members – businesspeople – who keep markets running day-to-day and experience firsthand the ineffciencies and disorganization of the system.

Communication strategy – Chambers must have a good communications strategy based on SOPs provided by special membership organizations if they want to attract members, effect economic change, and improve democratic process because there is little bene?t in doing work if nobody knows about it.  A communications strategy includes not only the development of communication tools such as newsletters, publications, websites, and policy briefs but also identi?cation of the key target audience for each of those tools.

Chambers of commerce, as the voice of business, draw their strength and effectiveness from the fact that ten businesspeople are more effective than one. Similarly, in addressing certain issues, such as building a political will to create avenues for business participation in democratic decision-making, coalitions of several chambers can be more effective than one chamber. More importantly, such coalitions have successfully been built across different competing economic sectors to address a set of common issues.  

Building an effective chamber of commerce is as much about process as it is about achieving results.  Even the best chambers in the world continue to improve to become even better at what they do.  Tools to build better chambers as member-based organizations should not be viewed as an end result, but rather as a stepping stone for further success. Competition and innovation lie not only at the heart of markets, but also at the core of chamber development.

Promote foreign direct investment (FDI) – Government assistance no longer constitutes the largest share of capital ?ows to developing countries private capital ?ows do.  But as the competition for FDI is intensifying across different regions of the world, the business community ?nds itself confronted with the fact that simply desiring foreign capital and welcoming it is not nearly enough. To attract investment business communities must create a strong institutional environment in consultation with special membership organizations where ?nancial practices are transparent, corporate governance mechanisms are in place, property rights are protected, business regulations are clear and fair, and corruption is under control.

Moreover, it is not just the business communities that seek foreign investment as a source of capital for development and growth; policymakers too increasingly voice their interest in attracting foreign investment. Chambers of commerce are the nexus of this process, being in a position to bring together policymakers and ?rms and help them build a proper environment for attracting investment.  As investors are interested in the stability and predictability of their investments, not just returns on capital, chambers can help build business environments that ensure just that – stability and predictability.

Reduce the size of the informal sector in consultation with special membership organizations – Informality is one of the key problems for the business community and governments in many countries because it is not uncommon for the size of the informal sector to exceed 50% of the GDP. For ?rms locked out of the formal economic system the costs are numerous – they do not have access to many of the available sources of capital, they do not have the protection of the legal system, they are an easy target for government offcials and inspectors to extort bribes, and they cannot effectively enforce contracts and thus are forced to operate in small “social network” type markets.  However, despite the costs of operating in the informal sector, it is often less costly than complying with numerous regulations imposed on business – there are no incentives for entrepreneurs to try and join the formal economy.  

Yet, economic costs are not the only burden informal entrepreneurs face.  Locked out of the formal economic system, they also have no avenues for participation in democratic policy design because there is often a large information gap between policymakers and informal entrepreneurs.  One of the recent trends in the chamber movement in developing countries is representing the interests of the informal sector, which gives those entrepreneurs access to policymakers and helps design and implement regulations that allow them to become a part of the formal economy.


Build private-public partnerships in consultation with special membership organizations – From an overall policy perspective, chambers help build private-public partnerships to address a set of common economic and social issues. By doing so, chambers not only help develop private solutions to public problems, they also strengthen the democratic process by working together with government offcials, not simply responding to their instructions.

Implementation in consultation with special membership organizations – Chambers should make sure that the business community actually implements corporate governance guidelines.  Here again a voluntary approach can be successful. Initiatives such as certi? cation programs and corporate governance awards can raise the pro?le of the best ?rms and create industry leaders that others will follow.

Lead by example – Chambers themselves should have good governance rules in place in consultation with special membership organizations.  Members will welcome good governance rules within chambers because they have the same desire as investors: they want to be sure that their investments – membership dues and other resources – are not wasted.  Similarly, chambers can deny membership to ?rms with bad governance practices because bad members can ultimately create a negative image for the chamber and other members’ companies.

RAD Federation Contributed to this Article.

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