Inclusive business models key to boosting Asean’s economic growth
MORE businesses in the ASEAN region are contributing to economic growth by providing income opportunities and relevant, affordable services and goods to vulnerable, low-income communities.
These types of businesses go beyond traditional corporate social responsibility. Referred to , as inclusive business (IB), this type of endeavor integrates the poor in the core business as suppliers, distributors, consumers, and retailers.
With 332 million people in ASEAN regions living in poverty, IB companies have the opportunity to tap a majority of these people.
“Because inclusive business creates jobs with the goal of bettering our quality of life, especially for low-income communities, they help us realize the ASEAN Community Vision 2025’s goal of building a people-centered and people-oriented ASEAN,” said Trade Undersecretary and Board of Investments (BOI) Managing Head Ceferino Rodolfo. “Inclusive business also allows greater cooperation between the private sector and government to improve lives and foster sustainable economic growth.”
IB companies are currently less than one percent of all registered companies outside ASEAN’s informal sector, but they are increasing fast and attracting nearly 60 percent of impact investors in Southeast Asia. These companies have made a positive social impact on millions of people for different sectors like health, water, energy, and housing.
The highest impact models and scales in the ASEAN are found in the agribusiness sector. Thailand’s Urmatt Group, for example, entered the agribusiness sector by addressing the challenges of smallholder farmers who lived on meager income. They undertook helping the farms go chemical-free, showing that these organic methods would benefit the farmers’ health and produce a higher rice yield. Today, the 3,000-plus smallholder farmers that produce organic rice, chia and coconut products also enjoy higher income levels.
Kennemer Foods International (KFI), an IB model in the Philippines, is a major supplier of cacao to the global confectionery industry. KFI saw the need to equip smallholder farmers with the capacity to grow and maintain cacao, get higher yield, and prevent plant diseases. Over 10,000 farmers from Mindanao and parts of Visayas were given high-quality planting materials, training, and agritechnologies. Their incomes have increased fivefold while the company has grown sevenfold since it started the IB program.
Inclusive business in the ASEAN member states
Most IB models in the ASEAN are implemented by medium to large-sized companies and contribute indirectly to the growth of micro, small, and medium enterprises.
IB models, however, can emerge from corporate social responsibility programs (CSR) and social enterprises (SE), which are businesses that need more capital to grow and deliver social impact on a smaller scale. Several ASEAN member states also have existing laws on CSR and SE that can serve as springboards to future IB models and policies.
The Philippines, which chairs this year’s ASEAN and advocates IB in the region, identified IB models as preferred areas for the 2017-2019 Investment Priorities Plan (IPP). Through the Board of Investments, the Philippines provides fiscal incentives to companies engaging micro and small enterprises at the core of their business operations.
Increasing access to relevant information and financial resources, as well as the provision of financial incentives, are the next steps that ASEAN members can do to create an economic climate that encourages IB investments.