Inclusive growth, the future of ASEAN business

By Lan Mercado   September 10, 2018 | 01:00 pm GMT+7
Countries in the region need to adopt business models that look beyond the bottom line to promote prosperity for all.
Lan Mercado, Regional Director for Oxfam in Asia

Lan Mercado, Regional Director for Oxfam in Asia

We, the people of ASEAN, our leaders, governments, businesses, and activists, want an Asia that works for all of us.

Le Luong Minh, former Secretary-General of ASEAN, said that they want to advance towards inclusive growth and sustainable development, and its Economic Community Blueprint 2025 pictures a region that works for all – a resilient, inclusive, and people-oriented, people-centered economy.

In our region, we've seen remarkable economic growth over recent decades; in less than five decades, the gross domestic product (GDP) has climbed from $37.6 billion in 1970 to $2.6 trillion in 2016, driven mainly by the exponential growth of private sector enterprises. In the past two decades, over 100 million people have gained jobs, and millions have overcome poverty. Investment is up, infrastructure is rising, trade is expanding, and regional prosperity has boomed.

So, then what’s the problem?

Despite this economic boom, millions of citizens are struggling in poverty. Here’s an interesting contrast: while the Asia-Pacific is home to more billionaires than anywhere else, more than 70 million in Southeast and East Asia don’t have enough food to eat. The economic gains achieved mostly by businesses, focused on maximizing profits almost exclusively, have resulted in an ever-widening gap between the rich and poor.

According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), income inequality increased 20 percent in Southeast Asia in last 20 years. The evidence is telling: the four wealthiest men in Indonesia have more wealth than 100 million people; in Vietnam, the country’s richest man earns more in a day than the poorest person earns in 10 years; and in Thailand, 56 percent of national wealth belongs to the richest 1 percent.

Women and girls have been left behind. They earn up to 30 percent less than men do for the same work, and while performing two and a half times more household chores and other forms of care work. This is despite their enormous economic potential. A study by the Asian Development Bank estimates that if women’s workplace participation rises from 57.7 percent to 66.2 percent, in just one generation, Asia’s overall economy could grow by 30 percent.

Clearly, we have an issue which we all care about, but where can we find a solution? Given that both growth and inequality seem to be a result of businesses, we believe they have the strongest potential to change the dynamics of how prosperity is shared - by being more inclusive and responsible.

Not only because it’s the right thing to do, but also because that’s where the future and demand are.

Increasingly, consumers across the globe are saying that they want to buy from ethical companies who develop market-based solutions to social and environmental challenges. Sixty-four percent of Southeast Asians say they’ll pay more to companies who care, and our consumers are more welcoming of inclusive and sustainable businesses than those in many developed nations including Europe, North America, Australia and New Zealand.

It’s not only consumers. Investors and governments are calling for change, demanding and promoting ethical and socially responsible business. Environmental, Social and Governance (ESG) investing is growing, and social or impact investing is grabbing ever more attention with already $3.6 billion spent in Southeast Asia.

On the occasion of the World Economic Forum on ASEAN, Oxfam on September 11 will launch a discussion paper entitled ‘The Future of business: Shaping inclusive growth in Southeast Asia’ that presents a spectrum of responsible business models that can help to deliver more sustainable and inclusive economic development, zooming into gender equalities at work.

Our governments are actively promoting equitable business models, especially social enterprises, by establishing regulatory, financial and soft incentives. For instance, Thailand has a Social Economy Office and tax exemptions for social enterprises. Malaysia has a Social Outcomes Fund financing those serving the needs of poor and marginalized people, and Singapore provides support and guidance. While there is still a long way to go, governments’ efforts to promote social entrepreneurship in the region are leading the world, second only to North America.

A fruits vendor transports empty basket on a bicycle while returning home on a street in Hanoi, Vietnam, August 29, 2017. Photo by Reuters/Kham

A fruits vendor transports empty basket on a bicycle while returning home on a street in Hanoi, Vietnam, August 29, 2017. Photo by Reuters/Kham

So, what defines a successful inclusive business? They have three key features.

First, they improve the living conditions of poor people by creating jobs and opportunities to enjoy a decent living, providing them with skills, access to markets and infrastructure, or delivering goods and services they need and can afford.

Second, companies integrate communities in value chains in mutually beneficial partnerships where producers can earn a decent and resilient living while creating more robust and competitive business processes.

Third, business will reap commercial success through better productivity and quality, market differentiation and expansion by including poor people to create sustainable economic value.

From initiatives that promote social and environmental sustainability in the Cambodian agriculture and garments sectors and inclusive businesses working with poor communities in Thailand and Laos, to Fair Trade social enterprises whose profits are plowed back to producers, a vibrant spectrum of more equitable, inclusive, and sustainable business models is emerging. In the social enterprise sector, Southeast Asia is leading the way on pay parity and leadership opportunities for women.

These social businesses are the result of partnerships between unlikely allies - entrepreneurs, communities, and civil society organizations like Oxfam - and such novel coalitions are crucial to building inclusive businesses.

Today, all businesses have a primary and universally recognized duty to respect human rights and pay a decent living income. On top of that, there is an opportunity for businesses to stand out and be more appealing to consumers by adopting practices that make them more people and environmentally friendly.

However, the real rewards can only be reaped by working in ways where business and society can benefit together by integrating social and environmental factors at the core of business operations. The future of business lies in models such as social enterprise which pursue dual visions of financial sustainability and social wellbeing, going beyond just profit maximization.

*Lan Mercado is the Regional Director for Oxfam in Asia.

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