Asia’s Private Sector Driving Region’s Social and Economic Development

October 5, 2016

By Anthea Mulakala, Mandakini Devasher Surie

The Asia Pacific is forecast to be the world’s fastest growing economic region over the next decade—a remarkable rise that has largely been attributed to the rapid growth of its private sector. Companies such as AirAsia, Tata Group, Samsung, LG Electronics, and Alibaba have been altering traditional ways of doing business, bringing new technologies and innovation to markets, and creating additional jobs and opportunities that have brought millions out of poverty.

The Asia Pacific is forecast to be the world’s fastest growing economic region over the next decade—a remarkable rise that has largely been attributed to the rapid growth of its private sector. Photo/Conor Ashleigh

In August, corporate representatives, government officials, policy specialists, and development practitioners from more than 10 countries gathered in New Delhi to discuss the expanding private sector engagement in development cooperation at the 15th meeting of the Asian Approaches to Development Cooperation (AADC). Jointly convened by the Korea Development Institute (KDI) and The Asia Foundation, AADC explores the role and contributions of Asian countries to international development and south-south cooperation.

The overriding message from the conference was that the days of business being peripheral to discussions on development cooperation are long over, that traditional aid is no longer sufficient, and that the private sector now has a vital role to play. Asian companies are increasingly responding to this call nationally and internationally.

Chinese chambers of commerce and industry associations have developed standards of social responsibility for Chinese engineering contractors and are requiring member companies to balance resource development with environmental protection and social development in partner countries. In 2013, India introduced a law requiring companies with an annual profit of 10 billion rupees to contribute 2 percent of their profits annually to corporate social responsibility (CSR). This law has the potential to unlock $2.5-3 billion in funding from around 16,000 eligible companies for social impact.

Participants said that traditional sources of development finance are insufficient to address the challenges faced by developing countries and that the private sector has the potential to do more than merely implement government programs. Strategies that engage the private sector in project design and offer innovative public private partnerships (PPP) may stimulate increased private resources to fund the finance gap. India’s EXIM bank, for example, has shifted from a product-centric to a customer-oriented approach and has introduced a new financing plan, the Hybrid Annuity Finance Model, which has been a game-changer in the previously sluggish Indian road sector and could apply to India projects in partner countries where traditional government aid falls short.

Representatives from AirAsia, LG Electronics, Ricoh, Jain Irrigation, and Cisco also shared their experiences of delivering high social impact in areas such as social enterprise development, building digital literacy, and providing access to water for farmers.

Increasingly, these companies are going beyond CSR and philanthropy to promote “shared value” initiatives. Shared value strategies have both social and business value, advancing economic competitiveness while at the same time addressing social and development challenges. Ricoh’s “Bottom of the Pyramid” project in India, which, in partnership with local NGO Drishtee, identifies and develops businesses for local entrepreneurs in poor communities in Bihar. The first Women’s Shop opened in 2011, and is supported by Ricoh technology. Today there are 42 such shops, providing employment, income, and empowerment for Bihari women, while at the same time expanding Ricoh’s market for IT solutions for small businesses. Similarly, Cisco, a global IT giant with large-scale operations in India, introduced a network academy that has trained 1 million students across 24 countries in Asia. Unique to the India program is the Women Rock-IT initiative, a quarterly event for girls and women designed to inspire young women to consider careers in IT as well as support and motivate female students already on that journey.

Participants agreed that delivering on the 2030 agenda laid out in the global Sustainable Development Goals will require strategic and inclusive partnerships among the government, civil society, and the private sector. Asian governments are facilitating this collaboration. Korea’s new medium-term ODA strategy for 2016 to 2020 emphasizes shared value initiatives and promotes strategic partnerships between business CSR and government ODA. The Australian government has also launched a new business partnership platform that provides a matching grant mechanism to enable businesses to partner with DFAT on investments that deliver social and commercial return.

Amid this innovative and expanding space for the private sector in development cooperation, there are challenges that impede impact. Chinese companies have become more aware that they need to be more attentive to social and environmental issues in partner countries. Strategies for linking business with local communities and NGOs are needed. In response to this need, Syntao, a Chinese business strategy consultancy, and The Asia Foundation have developed guidelines for community engagement for Chinese companies working overseas. Measuring social impact—as opposed to profits—is also a new challenge for many companies. Along these lines, some private NGOs’ partnerships are experimenting with “Social Return on Investment” frameworks to measure results.

Lastly, bringing diverse partners together takes effort. Government, business, and NGOs often have different legal obligations, resources, skills, constituents, governance, accountabilities, and language that may frustrate and inhibit collaboration. Organizations like the Forum for Indian Development Cooperation (FIDC), which provide a common platform for these diverse stakeholders to share experience and forge partnerships, help bridge these differences.

The conference ended with a roundtable on new frontiers in private sector partnerships, delving more deeply into concepts such as shared value, social impact bonds, and co-creation wherein companies, NGOs, and governments bring their respective strengths to a project to create higher social return. Participants concluded that commercial return and social return are not mutually exclusive, and that strategic partnerships among business, government, and civil society offer the most promise for sustainable impact in development cooperation.

The AADC Delhi meeting was jointly hosted by the Forum for Indian Development Cooperation, Research and Information System for Developing Countries, and the Voluntary Action Network India.

Anthea Mulakala is The Asia Foundation’s director for international development cooperation. Mandakini Devasher Surie is The Asia Foundation’s senior program officer in India, and tweets at @mdevasher. The views and opinions expressed here are those of the individual authors and not those of The Asia Foundation or its funders.

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