Centralized vs Decentralized Social Economic Development

Merging Classic Business Approach with Social Enterprise Methodology for Enhanced Supply and Value Chain Development


In my 20+ years of applied experience with multiple industries, I can honestly state that my working knowledge is very extensive – the advantage of applied experience is that its not based on hypothesises but rather based on getting my hands dirty; that kind of experience is invaluable.

Now, I can give 100s of examples but I will just share a classic example that I often give in my daily workshops with international travelers.

We all know that the classic example of business is required and a necessity I.e. Centralization of resources within a company to maximize profitability and productivity while reducing various risks is a standard approach, however, what are the benefits of such a methodology towards developing countries vs a social enterprise methodology? Now, I am not recommending one is better than the other as they both are important but rather suggesting they are both required and should work and cooperate in a symbiotic relationship to ensure a balanced approach towards nationwide social economic development, strengthening of resources, greater distribution of wealth and resources, etc., within today’s Global Open Market Economy.

Centralized Approach to Tourism Business Development in Mongolia – Basic Business Practices

This is going to be a bit of cold hard truth, so anyone who easily influenced, easily gets upset, etc., you are going to have to “suck it up” for a few paragraphs, but do keep in mind that this approach is a necessity in social economic development – the recommendation is that such businesses should learn to work with Social Enterprises to maximize nationwide geographic development and more.

Ok, take a few deep breathes, remember “patience” and here we go!

In my works I often have to choose the best social economic supply and value chains of a country to understand the flows of industries and search of the best node along the map that represents “whatever happens here is a proper representation of what happens across the country in lesser forms” and likewise the opposite, whatever doesn’t happen is a proper representation of what does not happen across the country as this is the best-case “supply/value chain and node” scenario.

Now taking that variable approach – in Mongolia the Ulaanbaatar to Gobi Desert (Hongor Els Sand Dunes) is one of the best supply and value chain examples across the entire country, 500+ guesthouses, tour operators and independents operate along this supply chain generating millions of dollars per year via thousands of travelers. So the question becomes, what is the social economic benefits from the international travel, tourism and hospitality sector to a node along this route? Their is best/worse case example node where everyone overnights for less than 24 hours as they continue to the Gobi Desert and likewise overnight again on return back to Ulaanbaatar and near this location is a local village.

Many questions have to be asked, but I will spare everyone the survey jargon – simply one could ask “how beneficial is the tourism industry to the nearby local village?”

In the old days this was the situation:

Owing to the lack of “quality of rural resources” the following happened to guarantee lower risk and higher quality of trips:

1. Fuel and oil – procured and transported from Ulaanbaatar (mainly)

2. Food and drink – procured and transported to rural locations from Ulaanbaatar (mainly)

3. Human resources – procured and transported to rural locates from Ulaanbaatar (mainly)

Now please take into consideration that these 3 key areas are actually Industries on macro level: Fuel and Oil Industry, Food and Drink Industry and Human Resource Development. These three industry influences actually have massive and direct impact on social economic development and market diversification of social economic development activities within communities; without accessing these benefits could significantly reduce that community’s ability to advance its social economic development.

Imagine the level of profits that communities could generate from the tourism industry alone if that community had better quality fuel and oil, food and drink and human resources alone – every company, car and human being could access their local markets thus supporting their advancement aspirations.

But in reality, this wasn’t and still isn’t happening in many rural locations; the reality is simply there are a couple local people working and maintain the rural “Ger Camps” earning meager salaries that can not impact their communities/villages’ social economic development. I won’t go into the numbers as it may start a riot in Mongolia because I can tell you, honestly, the tourism industry really makes a few companies extremely rich while keeping the entire country in poverty via exploitation of human resources, culture, etc.

If I was to publicize a list of companies that overly exploit Mongolia’s human resources, nomads, communities, etc., well yes… we would have a riot in this county. So its in the best interest of a lot of companies throughout Mongolia to tread lightly and just try to improve yourselves; start trying to work with organizations like GER to GER rather than trying to compete social politically and economically.

De-Centralized Approach to Tourism Business Development in Mongolia – Specialized Humanitarian Practices

Now I am not going to state that this is a better methodology but I will say as none of us are getting rich and we continually have to watch our pocket books; but I will say that in symbiotic relationship with the aforementioned it could generate a win-win situation for both approaches, the people and the county as a whole.

Once again take a deeper breath!

Simply decentralization means that, decentralization – we take the risk by giving back 70%-80% of annual revenues to rural communities via suppliers, drivers, human resources, food and drink, and more; the opposite of what the centralized methodology does. In addition to that, we set up lets say as an example 20 nomads around a community(-ies) and send out 100 travelers within a given season, that calculates as a 2000% increase in social economic activities for that community.

Now imagine if you had a 2000% social economic increase into your business, that is a missive number for some extremely remote villages!

1. Nomadic families have to get food and supplies – so they purchase more product from the local food and drink

2. Nomadic families and village people have to use more fuel and oil

3. Greater demand for English – Businesses, Schools, etc., thus creating a demand for rural educational institutions to request a VSO volunteer or American Peace Corps to their village to teach their locals the English Language “Properly”.

4. And lets say that these travelers also visit the local village’s pharmacy asking for basic cold medicine, etc., and locals quickly begin to re-invest into their business hoping to sell product to the foreigners but quickly discover there is more of a local market than an international market…

Results of Decentralized Development (Only going to list a few)

1. Education of the Community/Village is going up

2. Health of the Community/Village is going up

3. SME (Business) of the Community/Village is going up

4. Once Community/Village social economic enhances – greater public and private sector investments become available

5. Once Communities/Villages become sustainable – their distant nomadic populations become sustainable as they can access better health, education and supplies

Benefits of a Symbiotic Partnership Between Centralized (Common Business)/Decentralized (Humanitarian Approach) Development (Only going to list a few)

1. Cooperate Responsibility for Large Tourism Companies; they can support Decentralized Development Initiatives.

2. Industry and Government Support for Decentralized Development Initiatives like GER to GER

3. Greater geographical development of a countries’ social economic potential along numerous supply and value chains

4. Greater wealth distribution

5. Greater market diversification

6. Greater health, education and SME development out-reach programs

7. Etc.

As I stated before several times, its not a competition, its about getting the right people to do the right job at the right time. Respect!