Building a social economy in Asia
A recent Asia Policy Dialogue brought together officials and advisors from 14 countries to discuss how governments can support social enterprise and social investment. Tristan Ace and Adam Pillsbury of the British Council report.
Why are governments in Asia supporting social enterprises to address social and environmental problems? And what approaches are they taking to build social economies that deliver more sustainable and inclusive growth?
These were some of the questions that brought together senior officials and government advisors from 14 countries in Asia, as well as representatives from the UN, Organisation for Economic Co-operation and Development (OECD), Asia Development Bank and World Bank for an Asia Policy Dialogue on social enterprise and social investment held in Hong Kong on 26 May.
The event was kicked off by moderators Cliff Prior, CEO of Big Society Capital, and Paul Carttar, who established the Social Innovation Fund under President Barack Obama, who set the scene and outlined the policy environments in the UK and US, respectively. Speakers from each of the 14 represented countries then gave overviews of the drivers and support for social enterprise in their countries.
One recurring theme was that traditional economic models were causing widening income inequality
Across the region, social enterprise policies are driven by a range of factors, but one recurring theme was that traditional economic models were causing widening income inequality. South Korea, for instance, adopted a Social Enterprise Promotion Act in 2007 following a steep recession that left many Koreans questioning the traditional trickle down economic system centred on chaebol (large business conglomerates).
Another common driver is the need to deliver public services more efficiently. The government of Hong Kong, which already delivers 40% of its total expenditure in subventions rather than in direct spending, offers funding to social enterprises that alleviate poverty and employ people with disabilities.
The need for innovation in addressing social problems is a common factor in both developed economies such as Japan, which has an aging and shrinking population, as well as in less developed and more youthful Pakistan, which needs to create 36m more jobs in the next 10 years.
In Myanmar, many domestic NGOs received significant funding from foreign organisations when the military regime was in power. But according to Professor Aung Tun Thet, a former senior economic advisor to the president, foreign funding has eroded now that a democratically elected government is in charge, and a key challenge is how to help these NGOs adopt more financially sustainable social enterprise operating models.
The levels and types of government support range widely across the region and are shaped by the specific challenges and cultures in each country.
In Korea, government has taken an active role in building a comprehensive ecosystem for the social economy. The metropolitan government of Seoul, for example, has adopted an ordinance to procure goods and services from social enterprises (for a total of USD $57m in 2015), opened a Social Economy Support Centre (to provide incubation, build markets, conduct research) and established a social investment fund. These initiatives have supported an impressive 353% growth in the number of social enterprises in Seoul between 2012-15.
Another pacesetter in the region is Thailand, which has created a range of support structures for social enterprise and social investment. It passed a Social Enterprise Promotion Act, formed a National Taskforce on Social Impact Investment, and offers tax relief for social investment. It is now preparing to set up an investment fund for social enterprises and considering a new business form specifically for social enterprises that would be similar to the UK’s Community Interest Company.
Other countries are adopting supportive legislation. In the Philippines, a PRESENT Bill (poverty reduction through social enterprise) has been drafted and is expected to become law in 2016. There is also support to develop an “inclusive business accreditation” to encourage big corporations to become more social.
Government in Indonesia recognises that social enterprise is aligned with its priorities and a new entrepreneurship law that includes provisions to support social enterprise is expected to be adopted by parliament in 2017. In Hong Kong, by contrast, although government has championed the sector and provided some funding to catalyse it, it is reluctant to bring in any additional regulation.
In India, where social enterprise and social investment are thriving, government has likewise offered limited support, but the Ministry of Finance is looking at creating a $2b fund for social enterprises. Government has also imposed a 2% CSR tax on the net profits of all companies and, despite some teething problems, this measure could drive significant funding into the social enterprise sector.
Challenges for social enteprise in Asia
In developing social economies, policymakers in Asia face a number of challenges. The barriers cited by the speakers include a lack of entrepreneurial role models and of a risk taking culture as well as limited experience of civil society and suspicion of the concept of mixing trade and social good.
A common challenge is how to institutionalise and build cross-ministry support for social enterprise within government, notably in ministries of finance. A second is how to convince governments to procure for social value in order to help build markets. A third challenge is how to stimulate the growth of social enterprise and incubate organisations that can operate at scale and take on significant investment.
The participants shared advice on effective approaches to galvanise support. These included identifying champions in government at national, provincial and municipal levels. There was also talk of educating politicians and building the evidence base and data to support policy changes. Jonathan Wong, the Science, Technology and Innovation Adviser at the UN, emphasised the need to help government recognise that social innovation is as important as traditional research and development and therefore worthy of similar support.
The Asia Policy Dialogue concluded with agreement to reconvene regularly as a body and in smaller working groups (focusing on themes such as tax, legal, data issues). The group will also look at producing regional reports on the state of social enterprises and social investment and hold workshops and training for government and multi-lateral stakeholders.
The co-writer of this article was Tristan Ace, who leads the British Council's East Asia Social Enterprise Programme across China and Hong Kong, Korea, Indonesia, the Philippines, Vietnam, Thailand, Malaysia and Myanmar.
Photo credit: Studio Incendo