Business and inclusive growth
Business and inclusive growth (December 12, 2007)
By Ben Teehankee
Mirror Image, Business Mirror
The clock is ticking towards 2015 when the country will be held to account for its commitments to the Millennium Development Goals or the MDGs. The United Nations website explains in hopeful language that “the eight Millennium Development Goals (MDGs) – which range from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education, all by the target date of 2015 – form a blueprint agreed to by all the world’s countries and all the world’s leading development institutions. They have galvanized unprecedented efforts to meet the needs of the world’s poorest.”
In the case of the Philippines, the poverty reduction component of the MDG translates to halving the poverty incidence of 45.3% in 1991 to 22.65% by 2015. This seems like an impressive improvement goal since we were already at 30% in 2003 -- until one realizes that Thailand had already halved its poverty incidence from 27% in 1991 to 9.8% in 2002!
Still, our government and non-government organizations have been slowly but surely lining up to work on the country’s MDGs. Not to be outdone in the MDG-related scramble to do good for the country are many of the most prominent business organizations who comprise Philippine Business for Social Progress (PBSP).
The concern for the MDGs from the business sector in general and for poverty reduction in particular is very welcome indeed, especially since the sector has been doing quite well. Financial indicators from the corporate sector of the country have been impressive in recent years. BizNews Asia reported that the 10 most profitable corporations of 2005 together netted P219 billion compared to P86 billion in 2004–an increase of more than 150%. The Philippine Stock Exchange (PSE) reports that the stock market return last year as measured by the PSEi was higher than 40% , an impressive increase from the 30% the index registered in 2000. The PSE also reports that total market capitalization has grown from almost P3 trillion in 2000 to more than P7 trillion by the end of 2006.
Despite the financial gains in the business sector, however, the sector’s growth has not been inclusive. The gains have not led to an increase in the general welfare. The sobering truth is that the average family income has been declining in real terms. The Family Income and Expenditure Survey (FIES) reports that average real family income dropped from P148,000 in 2003 to P144,000 in 2006. The Department of Labor and Employment (DOLE) continues to report widespread violations of labor laws by companies, ranging from non-provision of social benefits to illegitimate subcontracting.
As part of the MDG program, Corazon Urquico of the United Nations Development Program (UNDP) Philippines Country Office recently announced the ageny’s advocacy for more socially inclusive economic growth activities. A UNDP document provided by Ms. Urquico explained, among others, that “while economic growth is essential to human progress, it is not sufficient for achieving the MDGs”. The document expressed the agency’s commitment to support the country in “accelerating inclusive growth to ensure equitable, broad-based human development” and in the process “build the necessary (and often absent) ‘bridges’ between the gross domestic product/financial accounting approach and the wider, deeper human development approach.”
In 2005, business organizations, through the PBSP, committed P3.2 billion for the period 2004-2009 for MDG-related programs which would address poverty reduction, small and medium enterprise development, basic education, water and health. While this is a substantial commitment, I note that most of the envisioned programs target realities external to the business organizations themselves, such as community outreach and support for enterprise creation. I hope that PBSP can also show leadership in making business more inclusive by encouraging its member companies to ensure greater direct benefits to employees from the gains of business growth. I would like to see PBSP, for example, lead the way in protecting the rights of employees to a voice in company affairs through unions. It’s a public secret that a number of large companies actively discourage the formation of unions. I cannot imagine business ever being inclusive while managers continue to exclude employees from the discussion of important issues affecting their welfare.
Another inclusive practice I’d like to see more of are employee stock ownership programs such as that of Manila Water. Profit-sharing, as practiced by San Jose Kitchen Cabinets, for instance, is also consistent with the right of employees to a just share of the fruits of business activity – a right that is enshrined in the Philippine Constitution.
In the end, the emphasis on inclusive business is nothing new. It is just a return to the all-important need to link economic activity to the fulfillment of basic human rights. Business organizations are social institutions, after all, and must ultimately be judged by how they promote human rights and total human development.