‘Inclusive business’

“Inclusive growth” has become the buzz phrase in the Aquino administration with the noticeable lack of impact of the stellar economic expansion in the past two years on alleviating poverty. Inclusive growth simply means making the fruits of economic progress trickle down to the poor, or those who have less—or even none—in life.

One sure way of making growth inclusive is by generating as many jobs as possible. This can be done by investing in economic activities that have a big multiplier effect—for example, construction, which requires many workers and, at the same time, gives businesses to allied industries producing cement, steel, wood and lumber, electrical equipment and other building materials. The increased demand for their products will, in theory, lead them to expand production and, in the process, hire more workers for their factories.

Why then did the stellar economic growth in the past two years fail to curb poverty? It’s because investments—both by the public and private sectors—in manufacturing, industry and infrastructure did not grow as much. Economists point out that services, and not the labor-intensive industrial and public infrastructure sectors, have been the main growth driver of the economy.

The government has blamed lack of financing for its rather limited investments in public infrastructure projects like airports, roads and bridges. This has prompted the Aquino administration to tap private investments by embarking on its flagship Public-Private Partnership program, which has sadly been hindered by unnecessary delays as well.

That being so, the private sector should then rise to the challenge of helping fight poverty. For starters, it should take some risk in investing in areas where economic and employment conditions are not perfect. It should not expect the government to make investing risk-free for them. Last week, Cabinet Secretary Jose Rene Almendras told the Management Association of the Philippines that the government could do only so much in making the economy work, and that the private sector should join the state by adopting the concept of “inclusive business.”

He said the private sector could help reduce poverty by investing in the least developed regions, which include Quezon province and the Mimaropa (the provinces of Oriental and Occidental Mindoro, Marinduque, Romblon and Palawan). He pointed out that while the daily salary rate in Quezon is only P201, the province provides investment opportunities in retail and services, and that Mimaropa (Region 4-B) has a salary rate of P205 a day and yet provides business opportunities in the nonagriculture sector. Even the provinces of  Cavite, Laguna, Batangas and Rizal, where the average salary rate is P208 a day, provide investment opportunities in small-scale ventures.

Some private companies have embraced the concept of inclusive business in their operations, including fast-food chain Jollibee Foods Corp., which now gets part of its raw materials from small farmers in the provinces. Other companies have tapped micro and small enterprises in the regions as suppliers. But there is one major gripe among these entrepreneurs. At a forum sponsored by the Philippine Business for Social Progress last March, Philexport Cebu president Venus Genson highlighted the challenges that small entrepreneurs face when seeking financial assistance for their businesses: “They’re saying there’s a lot of money, but is it accessible?”

Genson suggested that a financing scheme be crafted to meet the needs of small and medium enterprises, pointing out that it is impossible for small borrowers like farmers to meet the bank’s requirement of audited financial statements for the past two or three years. Big local banks should step up to this challenge of financing the needs of the regions that need money the most.

Inclusive business is a global movement spearheaded by the World Business Council for Sustainable Development, a CEO-led organization of companies that is prodding the global business community to create a sustainable future for business, society and the environment. It was founded on the eve of the 1992 Rio Earth Summit by Swiss entrepreneur and philanthropist Stephan Schmidheiny, who believes that business has an inescapable role to play in sustainable development by making significant contributions to the creation of a sustainable society.

The Philippine corporate sector should heed his call.