WINGSForum 2006: The Challenges of Asian Philanthropy in the 21st Century

Jaime Augusto Zobel de Ayala II, Chairman and CEO, Ayala Corporation

Before anything else, allow me to congratulate the leadership of WINGS in successfully bringing this Forum together in Asia. As the only global network which focuses on supporting the practice of philanthropy worldwide, WINGS has taken upon itself a very important role that can encourage the birth and growth of philanthropy. This is especially important in developing countries and in Asia, where perhaps the practice of philanthropy is not yet as deeply rooted as in many developed countries of the West.

Let me start with the powerful prayer of Archbishop Desmond Tutu:

“Disturb us, O Lord, when we are too pleased with ourselves, When our dreams have become true because we dreamed too little; When we arrived in safety because we sailed too close to the shore. Disturb us, O Lord, when with abundance of things we possess, We have lost our thirst for the water of life; When, having fallen in love with time, we have ceased to dream of eternity; And in our efforts to build a new earth, Have allowed our vision for a new heaven to grow dim.”

These are powerful words – and we must remain disturbed. Especially those of us in the business community where competitive market realities force us to focus on monetary value creation that, at times, leads us to overlook the serious social problems that businesses might generate. But all of us – business, government, civil society – have the responsibility to remain disturbed together.

We can think about our world in terms of the tremendous problems we need to solve or in terms of the challenges of an uncertain future where solutions can be found by focusing on answers as a community. We can regard the world either with a problem-solving mind set or a vision-shaping one. Either perspective demands forthright action.

All of us in this room have an understanding of the many social problems of our time.

• Poverty, disease and ignorance continue to afflict billions of people.
• The very sustainability of life in our planet is under threat from an environment in extreme stress, primarily from human activity.
• Armed conflict, social strife and violence from across nation states are daily topics in the international press.

Amidst all these seemingly unsolvable problems, it is a great source of hope and inspiration to all of us that the countries of the world, under the United Nations, have been able to declare a clear distillation of the most important problems we have to solve in the Millennium Development Goals.

These goals are just one example of how our world can come together around important issues and set a unified sense of purpose. But the pace of change in relentless.

• Global economic integration continues its inexorable march, aided by technology that allows remote communities to sell their products online or the whole world to watch major events unfold in real time.
• On the other hand, the aging of developed societies and the growth of younger, faster-multiplying populations of the developing world as well as the phenomenon of global migration, are creating demographic patterns that are influencing all economies, cultures, and societies.
• The power of technology in mass media, connectivity, automation, transport and communications is likewise transforming the world beyond anyone’s imagination.

Clearly, we all face the unpredictability of a global future being shaped today by powerful forces we can hardly understand, much less control.

This is the global context that the philanthropic sector faces. And the challenge before us is to offer strategic, sustainable, and permanent solutions to the grave problems of the world and to work together to realize credible visions capable of shaping our increasingly shared future.

I thought it would be useful to share with you some thoughts about this challenge.

Corporate Philanthropy Then and Now

It used to be that philanthropy is what one does after one accumulates, or inherits, great wealth. Many of the world’s most important foundations were established by businessmen who made their fortunes at a time when there was a weaker social and ethical contract between businesses and society. In today’s world, the provenance of the wealth backing a philanthropic enterprise is far more relevant material and decisive to the moral authority and public credibility of that enterprise.

The economic sources of philanthropic wealth have likewise changed from, say, railroads, mines, steel mills, car production, explosives or war materiel in the 20 th century, to software, food production, finance, energy, shipping, retailing or real estate in the 21 st century. But the ethical standards and moral expectations governing the acquisition of wealth backing philanthropies are now demanding stringent adherence to the highest levels of good governance.

Corporate social responsibility emerged and flourished as an idea that encompasses philanthropy but includes the moral purposes that businesses serve on the way to generating the profits that will eventually finance philanthropic giving.

Business, more than ever, is expected to operate ethically in the market.

Even beyond these ethical mandates that regulations and reputations enforce and reward, the bar for corporate social responsibility has risen even further.

Businesses are now regarded as having an implicit social contract with society and now, more than ever, they need to take into account the social impact of their business activities. Pharmaceutical companies are now being asked about their impact on health, including the inability of national governments to stamp out certain illnesses because of the high cost of medicines; fast food businesses have to be responsive to the impact of their offerings on the nutritional status of their customers; energy and mining companies are held accountable for their impact on the environment.

Within every sector of the economy, a moral struggle is raging. Public demand for companies to be accountable for their social impact is clearly rising. Some companies regard this as a threat to sustained profitability. The most forward-looking companies, however, regard this as a way to create new opportunities for securing improved competitiveness and building a higher level of trust among their increasingly varied stakeholders.

In fact, one of the most potentially fruitful areas for business engagement with social problems revolves around the business of meeting the basic needs of low income groups and social priorities not traditionally recognized as commercially viable. This has been identified by GK Prahalad as “Doing Business at the Bottom of the Pyramid”. Many companies, for example, such as those in our group responsible for water distribution and telecom services, are finding out that the needs of low-income families can be the foundation of profitable businesses. While delivering services to these low income sectors, new models of engaging communities to solve business problems are developing.

• In our water distribution business, it is the “barangay” unit itself that collates billing of their customers on behalf of the company.

This is especially true in developing countries where low income groups account for a large percentage of the population and there are many other areas of social development where business solutions not only yield tremendous social benefits, but can also be value enhancing for the risk capital stockholders put to work.

Another interesting way of building up the scale of philanthropy while encouraging economic growth is by investing in programs or projects which create new wealth and production in the way that Grameen and other microfinance projects have done. This represents business at the bottom of the pyramid carried out by people at the bottom of the pyramid. It not only creates wealth and improves lives materially, but the entrepreneurial activity has a way of strengthening the social fabric by enhancing social relationships and getting people engaged as equity partners in their own futures. Our telecom subsidiary, Globe Telecom, for example, has empowered over 650,000 individuals as resellers of “telecom minutes” through their “autoload” system. This group generates the equivalent of over $2 billion a year with over 10% margins for the re-sellers.

In this context, Corporate Social Responsibility projects which focus on entrepreneurship should be seen as a way of building up scale and bringing progress. They can also bring peace and stability in areas which were previously affected by conflict. One example of this is a conflict-affected area in Maguindanao province in the Philippines, where combatants eventually became workers on a plantation producing bananas for the export markets. The area has become a pocket of peace because people now have a stake in their economic futures.

At Ayala Corporation, we have learnt to regard social issues as important to corporate strategy. Social issues ultimately make themselves known to business through regulatory pressures or changes in consumption patterns. To try to understand better how social issues might shape the emerging business environment, our corporation has routinely included background briefings on demographic, socio-cultural and political updates as part of our annual corporate planning exercise. This is a significant enhancement of what used to be a purely economic and financial approach to planning.

Towards more strategic philanthropies

Let me now focus on the specific challenges to philanthropic giving in this more complex and demanding world.

Private philanthropy I believe must confront three critical issues in order to become more strategic in offering solutions to the world’s problems or defining visions of the world’s future. This term “strategic” is not meant to denigrate what is often called “charity” – where grants and donations are made to address urgent needs of sectors at risk – victims of disasters, malnourished children, critically ill patients, and the like. They are just as important, especially to the individuals who need such urgent help.

But philanthropy must learn as well the discipline of looking beyond today’s crises in order to prevent those that will come tomorrow if we don’t address their underlying issues today.

The Need for Scale

First is the issue of scale relative to the magnitude of the problems. Scale has several dimensions. The levels of resources mobilized for philanthropic causes, especially in Asia, are still modest. The actual spending of philanthropic trusts is even more modest. In the United States, for example, there is growing pressure for trusts and foundations to pay out more than the required 5% of their endowments for the support of social development programs.

A much higher level of resources are needed for most of us to go beyond pilot projects to nationwide programs that create systemic change. That will be the only way we can truly make a significant impact on any of our countries’ worst social problems.

In developing countries like the Philippines, where the problems are tremendous and resources are scarce, some of us in the business community are experimenting with creating what we call “Social Consortia”, to borrow a page from the success of businesses which come together for major capital-intensive projects that need the resources and technical skills of a number of companies in order to achieve their goals.

One concrete example I can offer is a program we call GILAS (which stands for Gearing up Internet Literacy and Access for Students). This project has set out to put computer laboratories with internet access in all of our 5,789 public high schools. It is a truly ambitious goal and posed a tremendous challenge to us. But about three weeks ago, or 22 months since we launched GILAS, we celebrated the connection of our 1000th public high school.

This was made possible primarily because of the unity of purpose of a number of business leaders, some of them competing with each other in the commercial arena. They have transcended their business interests to work towards a shared vision, attempting a seemingly impossible task, and agreeing on a common agenda – that of a future of our youth as informed, knowledgeable and empowered because they have been given the tools to access the almost limitless store of information that is on the world wide web.

We were keenly aware of the difficulties and challenges faced by our public education system for adequate classrooms, teacher training, up-to-date textbooks and learning resources. Surveying the field, we searched for that unique point of intervention where we could achieve the broadest reach and make the greatest impact in the shortest possible time.

The answer was GILAS – to connect the seniors in the public high school system to the internet. We believed that by giving these youths computer and internet literacy skills, they could then parlay that into a good job with adequate pay, whether they stay in the Philippines or decide to go abroad. The rise of the call center, business process outsourcing industries, software development, and other ICT related companies made it even more imperative that we prepare our high school students in these skills.

It was not a program that could be taken on by any single company, foundation, or institution. And so GILAS was organized as a Social Consortium with the national and local government agencies, corporations, PTCAs of the public schools themselves, NGOs, and even our Filipinos abroad as active partners. We all understood that GILAS was not about making a profit. It was about national development. It was about a social investment in our youth and in our country. The members had to be motivated by a much loftier objective – that of ensuring a brighter future for all Filipinos.

Such collaborative work that can harness our limited philanthropic spending is still in its infancy in the Philippines as, I presume, in much of Asia and the world.

Expanding the Donor Base

These initiatives are primarily being undertaken by the country’s largest businesses but in my view, the second issue for the sustainability and growth of philanthropy is the limited breadth of the philanthropic or donor community, especially in our Asian countries. Philanthropy has not yet gone “public” in the same way that the public invests in widely held and publicly traded corporations. We will need to understand and overcome the cultural barriers preventing millions of relatively well-off individuals from supporting well-trusted and effective philanthropies.

Again, let me share with you my own limited experience on the matter.

At the turn of the new millennium, in my capacity as a board member of the International Youth Foundation in the US, I learned about a novel initiative called Children’s Hour that was to be launched by Prime Minister Tony Blair and supported by the UK retail giant Marks and Spencer. Children’s Hour would call upon all the working citizens of the world to donate one hour of their wages to children’s programs. I found the idea intriguing and agreed to bring it to my country.

Again, we rallied some friends and colleagues from the business community and the development sector to implement the program. To our amazement, we received an overwhelming response. We got the support of 343 companies big and small, which agreed to help by allowing their employees to have their donation deducted from their salaries. Some even offered to match what their employees donated. As a result, thousands of employees generously offered their one hour’s wage to the program. We felt it was successful, not only in raising funds but in broadening the donor base and therefore decided to continue the program locally.

Another effort we are undertaking, which might be of interest to other Asian countries, is to tap our diaspora community.

About 8 million of our people live and work abroad. Last year, they remitted about $11B, overtaking our Direct Foreign Investments and Official Development Assistance Funds combined. We believe that a growing number of them have succeeded to a level where enough wealth has been created to put them in a position to go beyond supporting the needs of their families – even their extended families – and to support programs of their communities, their churches, their schools and their universities.

A study undertaken by the Central Bank of the Philippines indicates that in 2003 Filipinos overseas sent more than $200 million in donations to various causes. This indicates that they are becoming a major donor community that needs to be informed about the urgent social development needs of the country and to be helped in facilitating such donations and in ensuring that the donations are properly and effectively utilized.

Interestingly, the effects from the philanthropy of this Philippine diaspora can potentially have a greater effect and go further than the contributions sent to home communities or local institutions. These initiatives can provide an entire channel for retracing roots, rebuilding community relationships, providing new contacts and adding new support networks. In a more sophisticated scenario, it can provide a channel for investments, entrepreneurship, and technology transfer for job creation in local communities. The growth of technology businesses in India, Taiwan, and China have in large part been funded by their own overseas or returning nationals, not as philanthropic projects but as business ventures. Nonetheless, they have had an impact that at least equals, and in many cases far surpasses, the impact of corporate philanthropy. Diaspora philanthropy could well evolve into higher levels of social and economic investment.

The Politics of Philanthropy

The third issue concerns the relationship between private sector philanthropy and government. Often, we hear people asking why they should donate to causes that should be addressed by the government. They worry that we are usurping government functions or are allowing governments to have a free ride on the back of private philanthropies.

These are hard questions to answer. They are issues we must consider seriously if we are to succeed in eradicating or reducing the social ills that are spawned by poverty. At the very least, we must perhaps make it clear to government that we consider them as the central social or public institution mandated by our people to address the social development issues that our philanthropies support.

We should not displace or replace government; rather, we must complement, catalyze, assist, encourage, enhance and productively engage governments so that they do not default, deviate, or get distracted from the social priorities we seek to address.

We cannot keep on supporting education improvement projects while ignoring ineffective public policies or corruption that lead to the continued deterioration of public education;

• or providing health care assistance to patients while turning a blind eye to inadequate, inefficient or inequitable public funding of health;
• or financing environmental initiatives while tolerating public policies and institutions that abet the destruction of the environment;
• or extending relief and rehabilitation assistance to victims of disasters while forgetting the culpability of government for failing to prevent communities from locating in hazardous areas or to put in place the necessary systems to respond to such disasters.

It might therefore be useful for private philanthropy to likewise get involved in policy debates regarding their areas of concern. As the chair of the Philippine Business for Education, a private sector group who banded together, said in articulating their desire to engage government in policy issues; it is the business sector that employs the products of the education system. If that system fails, business will not have the pool of human resources it needs to compete in the global arena. It is also the business sector that brings additional financial and technical resources to bear on social issues, giving them the right to offer their own ideas and insights on how government policy should be crafted for long term and sustainable solutions.

Civil society, on the other hand, clearly has a role in helping to articulate and form public opinion on government policies and programs. They can do so by keeping themselves fully informed on current trends and cutting edge ideas on development, so that they can collaborate with government while at the same time holding them accountable for providing the necessary policy infrastructure, legal environment, and efficient and effective use of government resources for development.

The most important tool for strategic philanthropy to achieve scale and engage government is the mastery of greater and better knowledge about mission-consistent spending. A better and deeper understanding of the root causes of social ills, for example, may enhance the impact of our resources, probably far more than additional resources can.

I am glad to note that this forum features many opportunities for discussion of the many different ways that people around the world are addressing the issues of strategic philanthropy, scale, and public governance that I raised. Our diversity and experimentation will accelerate our collective and individual learning.

Connecting with our moral imagination

As a last point, William Damon, a Stanford University professor who has written extensively about the moral formation of children and adults, describes what he calls our “moral imagination” as our capacity to generate new creative ideas that are rooted in and spring from our moral sense about right and wrong, just and unjust, fair and unfair, good and bad. He says that business ideas that emerge from an underlying moral sense are particularly compelling and thus ultimately likely to succeed because they come from our sense of who we truly are as persons.

This moral imagination could bring forth new ideas about better products and services as well as new ideas about improved processes and organizations. Since these ideas reflect our deepest beliefs, we often invest intense and sustained focus on their eventual realization. Often, this commitment is crucial and decisive to overcoming obstacles and resistance that any new idea invariably encounters.

The causes that different philanthropies support vary widely. But all seek an increased public good or decreased public harm.

• What are we learning from our experience?
• Are we moving according to our intentions?
• Can we move closer and faster to our desired goals?

These are questions that can connect with our moral imagination. And maybe impel us to find better, faster and more beneficial ways to do good or prevent harm.

I would venture to suggest that philanthropic institutions harness the disciplines of business in analyzing the social problems they seek to solve while retaining the passion that sustains us even when faced with the seemingly insurmountable problems of poverty.

We at Ayala are likewise always seeking better ways of implementing our corporate social responsibility. We listen to experts, we study best practices, we experiment on ideas that hold promise, and we ask third parties to evaluate what we have done. And we believe that we do use our moral imagination in business as in our foundation work. After all, finding the solution to our myriad social problems is, in a sense, more important than capturing market share or increasing profits. Both could disappear overnight if we allow the frustrations and problems of a large number of our people to boil over into social unrest.

Just as I started with words from Archbishop Tutu, let me end also with his words:

“Stir us, O Lord, to dare boldly to venture on wider seas, where storms shall show Thy mastery, Where losing sight of land, we shall find the stars, In the name of Him who pushed back the horizons of our hopes And invited the brave to follow Him. “

Congratulations again to the organizers of this forum and thank you for allowing me to be a part of it. May you have a fruitful and productive forum ahead of you.

Thank you.