Motoo Konishi, World Bank Country Director for the PhilippinesPhilippine

Corporate Social Responsibility WeekMakati City, Philippines

As Prepared for Delivery

Corporate Social Responsibility:

The Business Model for the next Asian Miracle
July 24, 2014
Dusit Thani Hotel

Keynote Message of Motoo Konishi

Country Director, World Bank Philippines

Mr. Jeffrey Tarayao, LCF Chair, Ms. Ching Jorge, LCF Vice-Chair, other LCF Board of
Trustees and Advisory Council members and honored guests.
MAGANDANG UMAGA PO.

I am privileged to be in the midst of advocates and practitioners of corporate social

responsibility. 
Twenty years ago, Corporate Social Responsibility used to be a charity initiative run by
the marketing department that involved collecting money or organizing volunteers for
a local charity.

Then, driven by events such as oil spills or child labor, it became obvious that this was
not enough to undertake corporate responsibility.  Some companies have started
thinking through the wider consequences of their business model.  Now, more and
more businesses are thinking about how to use the business model itself to solve
major social problems. Solving the social problem becomes the business model.

This evolution is not driven by a sudden increase in altruism in the business

community. Think of it like this: the market value of a company these days mainly
derives from “intangibles”—from its “image”, from its reputation, from the trust it
inspires. Its market worth does not derive from its short-term profit margins but from
public trust.  
Conversely, if the public loses trust in the company,  the damage to the market value of
the  company will be quick and dramatic. An oil spill doesn’t hurt because of the direct
financial implications for the clean-up costs. It hurts stock prices because of the loss of
trust. And in today’s Twitter and Facebook world, this loss of trust is very difficult to
“manage” or “spin”. So businesses have strong incentives to think of corporate social
responsibility in a much broader sense. CSR is not about dole out or charity or hand
out to the society.  It is what corporations do to solve social problems that help create a
sustainable society that in turn increases business and profits. 

Last week, our President, Dr. Jim Yong Kim, visited the Philippines. He had not been
here for almost 30 years. He saw that tremendous change had taken place. Dr. Kim 
saw a country which, he asserted, could become the next Asian Miracle. After decades
of disappointment, we really believe that NOW is the time for this country to live up to
this promise.

My message  today will be about the role corporate social responsibility will need to
play in realizing this miracle. Because, I believe that without it, the miracle will not
happen. 

As one famous line from a Filipino movie, says, “WALANG HIMALA!” (THERE IS NO
MIRACLE!)

But first, why this  optimistic  conclusion? Let me name a few reasons:

• First, Dr. Kim saw an economy which was doing extremely well. Despite the global
headwinds and two major natural disasters—the Bohol earthquake and Super
Typhoon Yolanda. the Philippine economy still managed to grow at a remarkable 7.2
percent in 2013—the highest among the ASEAN-5 countries.

• Second, this growth was derived from strong macroeconomic fundamentals, political
stability, and a government that is committed to reforms, even when they are difficult.

• Third, the country has a young, internationally-competitive and English-speaking labor

force. 

• Fourth, the Philippines stands to benefit from the global and regional economic
rebalancing and the strong growth prospects of a dynamic East Asia region. China’s real
wages are zooming up. The Philippines can be very much part of a dynamic “Factory
Asia”, and attract those parts of the production value chain which are currently looking
for new places to re-locate.

• Fifth, Government doubled spending on health, education and social protection

between 2010 and 2014, while keeping the fiscal deficit in check at around 2 percent of
GDP.

• Sixth, public debt has been significantly reduced and inflation is low. The country’s
external accounts are strong, due to the ever-resilient remittances and the boom in the
export of services.

There are other reasons.  He also saw the country’s commitment to fighting corruption
and to being transparent.  Yes, the  government is making huge advances in promoting
transparency, even when it hurts.   Competitiveness is also improving, although, as the 
government would be the first to acknowledge, not nearly fast enough. The country
had the “most improved” status last year in the Doing Business rankings of the World
Bank.

Programs that empower poor citizens and communities,  like the Pantawid Pamilya and
the KALAHI CIDSS National Community-Driven Development Program, are trying to
alter deep-seated patronage relationships and empowering the communities to
improve their lives. . 

On the international front, the Philippines signed on to the Open Government

Partnership. As part of this commitment, the Philippines launched its Open Data
initiative and immediately released over 700 data sets on the internet. This is
unprecedented.

So what our President, Jim Kim, saw, was that the Philippines has the right formula to
become the next Asian Miracle.
So how can the Philippines realize this miracle?  The “HIMALA”? (MIRACLE?)

Let me talk about four elements of CSR for the “HIMALA” to happen.

1) The Commitment to a Common Goal; 2) Open Government; 3) Education; and 4)

Climate Change
Commit to the Goals
One of the lessons learned from the successes of Asian countries like Japan, Korea,
Singapore, Taiwan, and perhaps China in the future, is that everyone in the country,
including the politicians, business community, academia, and the entire population
were pulling in the same direction for the country to develop. 

Furthermore, not only was everyone pulling in the same direction, the policies made
sure that the entire nation was lifted from the bottom, creating larger and larger
middle class that benefited and contributed to the economic growth and prosperity of
the country.  I think former President FVR calls it “Teamwork in Nation Building”.  The
Philippines has set itself clear goals that reflect well the success of the Asian Tigers. 
President Aquino’s Social Contract and the Philippine Development Plan were very
clear. The goal is to attain inclusive growth, defined as the reduction of poverty and the
creation of better jobs. There is strong convergence with the World Bank Group’s Twin
Goals: to eliminate extreme poverty by 2030 and improve the incomes of bottom 40
percent of the population.

So when we talk about corporate social responsibility, these should be our goals. As a
Japanese, I cannot stress enough how important this unity of vision is.  This vision
drove us to get our act together. Culturally, this is what I believe the Japanese  have
contributed to the whole debate about development. When central planning went out
of fashion, because it did not work, the East Asian model replaced it. We didn’t pretend
that we had it all figured out, so we went about attaining our goals in a practical,
learning-by-doing way. What did Deng Xiaoping say again? "It doesn't matter whether a
cat is white or black, as long as it catches mice."

To realize the HIMALA, we must come together under a single banner, single purpose,
and drive the country in the same direction.

Open Government

The role of good governance in attaining this goal is also clear. “Where there is no
corruption, there is no poverty”. In 1996, the President of the World Bank, Jim
Wolfensohn, said,  “Corruption diverts resources from the poor to the rich, increases
the cost of running businesses, distorts public expenditures and deters foreign
investors…it is a major barrier to sound and equitable development.”  Today, the World
Bank Group embeds the anticorruption agenda firmly into a strategy for good
governance.
Because inclusive growth is impossible to achieve without good governance.
Fighting the cancer of corruption is no walk in the park. Given the cozy relationship
which often exists between big business and government, it is difficult. It is also
sometimes difficult to determine where corruption ends and fiscal incentives start.

Let me also be clear why I mention this. In corruption, it takes two to tango. This is
where, I would argue, any Philippine business should start, when it thinks about
corporate responsibility. If we want to have massive investments in infrastructure, for
instance, where is this money going to come from? From those who pay taxes. But, we
have a big problem: the overall tax effort is too low to sustain the growth we all want.
How do we address this? This is a collective corporate social responsibility challenge for
everyone.  

I would urge everyone to start looking into these issues and openly discuss them in the
various business fora which exist. Everyone should be held accountable: government
and business alike.  This  is a huge corporate social responsibility agenda!  To maintain
stellar economic growth, tax and customs revenues need to improve. That is the simple
fact.

Education

Another challenge that corporate social responsibility should address is the jobs
challenge. Good jobs — meaning,  jobs that raise real wages and bring people out of
poverty — need to be provided to around 10 million Filipinos who were either
unemployed  (three million) or underemployed  (seven million) in 2012, and to around
1.15 million potential entrants to the labor force  every year over the next three years.
This means a total of 14.6 million jobs that need to be created in the next four years. In
addition, better jobs need to be provided to another 21 million Filipinos who are
informally employed. 

Higher growth can provide more Filipino workers with good jobs. Under the current
high growth scenario and the removal of key binding constraints in fast-growing
sectors, the formal sector will be able to provide good jobs to around 2.2 million people
in the next four years (or 550,000 every year between 2013 and 2016), or around
double the current figure.

But the majority of Filipino workers would still be left out. By 2016, around 12.4 million  
Filipinos would still be unemployed, underemployed, or would have to work in the
informal sector. Addressing this jobs challenge requires meeting a dual challenge:
expanding formal sector employment even faster while rapidly raising the incomes of
those informally employed. But good jobs need skilled workers, a challenge that
requires not only education but socially responsible corporate sector as well.

The needs of the Philippine economy need to be connected to the way how the
Philippines educates its work force. For that, the private and public sector dots need to
be connected. Students, educators, business and governments are operating in quickly
changing environments where the skills produced by the education system are often
not relevant or quickly become obsolete.

The private sector should not play a passive role, waiting for the education system to
produce the graduates and then invest tremendous resources in training and
retraining their new employees to be able to perform their jobs. The right skills should
and can be available upon graduation. What can the private sector do to change this?
The business can mentor students and develop a curriculum that will churn out the
kind of workers they need. It can provide stipends to students and guarantee them
jobs once they successfully graduate. It can open doors for students to intern and gain
experience. It can actively signal the skills they will need to fit its development plans. A
corporate social responsibility for the skills development will result in better outcomes
for everyone: the schools, the kids, the companies and the country.

There is a good example in the Philippines. The BPO sector is doing exactly that. To
sustain its stellar growth record, it has entered a partnership with the government and
over twenty colleges to improve the curriculum and make sure that college graduates
can find a job in the BPO sector. Again, this is not about charity. This makes business
sense - to ensure your company can recruit people with the right skills. But, if you really
think about it, you are actually creating a middle class to buy your products!

So the challenge should be clear by now. To reduce poverty and massively create jobs
we need good governance, both in government and  in the corporate world. And we
need better education, education that lands a job.
These are daunting challenges. But to become the next Asian Miracle, they have to be
met. To make matters even more daunting, the Philippines faces another challenge. 

The Challenge of the Impacts of Climate Change

The Philippines is one of the countries most exposed to multiple hazards and is among
those at highest risk to climate-change impacts. More intense rainfall events, more hot
spells, and stronger monsoon rainfall are expected. Typhoon Yolanda has heightened
everyone’s concern on what might become the “new normal” for the country, in terms
of increased intensity of natural disasters. 

So how should we respond?  We don’t have to look very far.  I know that some of the
top conglomerates and other private companies in the Philippines have put their act
together to boost efforts to prepare for disasters.  I think this is laudable and a good
way to move forward.  They have gone beyond the traditional way of looking at
corporate social responsibility.  They are thinking of ways to provide economic
incentives for private sector to invest in areas like Tacloban.

Dealing with disasters, managing risks, dealing with business continuity should become
part of core business of any company. The “new normal”  requires major changes in
land use and rezoning as well as new building standards so that infrastructure can be
“built back better”.

Finally, the government is critically reviewing the current government spending

systems, both in terms of speed, governance, transparency and effectiveness. With the
help of several restructured World Bank-assisted projects, the government is putting in
place more rapid and transparent spending systems. “FAITH” is the portal where the
public can track the contributions of the various development partners to the Yolanda
recovery and reconstruction efforts  and  “Open Reconstruction” is the portal to track
government spending . Overcoming the tragedy of Yolanda also means improving
governance through more transparency and accountability.

After Yolanda, it also became clear to the Government that the country needed an
overarching financing strategy to adapt to the “new normal” of climate change. The
corporate world has a key responsibility in this financing strategy, too.
First, there needs to be a better strategy for disaster risk financing and insurance. 
There needs to be a pool of resources at the national level to respond to emergency
responses and early recovery.

There also needs to be a better risk financing and insurance facility for local
government units. Local governments need a compulsory risk pooling mechanism to
improve their post-disaster relief and recovery response. This would also provide
financial and technical support for improving the insurance of public assets.

In addition, we need better risk insurance products through public-private partnerships

to increase the financial protection of households, SMEs, utility cooperatives, and
agricultural producers against natural disasters.

Second, the country needs to invest in resilience. There should be focus on financing
public and private investments in disaster risk reduction, reconstruction, climate
change adaptation, and lower Green House Gas emissions.

These ideas are on the drawing board. It is the social responsibility of corporates to
help resolve these problems if you want to be the next Asian Miracle.

Finally, every individual, every company, can take climate action.

Tackling climate change will take innovation, investment and the commitment of
governments, companies and civil society to change the way we work together. 
Climate investment is simply smart investment to keep our planet safe for future
generations. That is the corporate social responsibility we are talking about.

Conclusion

To conclude, the wind is in your sails. Many difficult reforms have been undertaken,
notably in budget transparency, public financial management, the fight against
corruption, and social service delivery.

But much more remains to be done: budget reforms, anti-corruption efforts, investing
in infrastructure - health and education, and improving transparency needs to continue
with even renewed effort. Public revenues need to be increased to be able to invest
more in human and physical capital. Only then will the miracle be realized.

There is a real sense of urgency in getting as much done as possible. This is not just the
business of government but it is everybody’s business to support these reforms. It is to
everyone’s interest, regardless of political, social and economic affiliations to make this
miracle a reality.
Now is the time for all of us to come and get our act  together, with a greater sense of
urgency. Let us seize the moment and make sure that the country is taking the right
direction at this critical juncture to becoming the next Asian Miracle.

“MAY HIMALA!” (THERE IS A MIRACLE!) But it’s up to the Filipino people to make this
happen.

Maraming Salamat Po.