“Business and development are essentially interrelated”

  12 min 29 sec to read

Professor Juan Miguel M. Luz
Professor Juan Miguel M. Luz is the Dean of Stephen Zuellig Graduate School of Development Management, a core faculty of Asian Institute of Management (AIM), Philippines. Established in 1968, AIM is considered as a pioneer of management education in Asia and Prof Luz is considered as one of the most influential Filipino educators. He specializes in analysing development environment and strategic management and development. Luz, who joined AIM in 1999, was appointed as Undersecretary of the Department of Education from 2002 to 2006 before re-joining the institution in 2009. In an interview with Sanjeev Sharma of New Business Age, Luz shared his views on some of the key findings of his research and experience on development works, CSR activities of companies and policy reforms. Excerpts:
What is the purpose of your visit?
 I am about to bring my class for a 10-day visit to Nepal in August this year for a course on Project Management. We will be looking into the projects of the World Bank and Asian Development Bank (ADB).  We will be meeting officials of World Bank, ADB and different partners. 
Can you tell us about the Asian Institute of Management?
The Asian Institute of Management (AIM) is a graduate school on Development of Management. We have students from all across Asia. Almost 200 graduate students are pursuing their Masters Degree here. We conduct both business and development courses. In business field, we run a MBA programme and for Development, we have Masters in Development Management programme. We do both works in terms of business policy and development policy and in research we do cover both areas. When we talk about development, we talk about work that is done by groups such as WB, ADB, WHO and other multilateral and bilateral organizations. We also work with governments. We have worked or are working with the governments of Philippines, India, Laos, Timor-Leste and Cambodia.  
The core areas of your research are social policy, development management and political development. Which key findings would you share with our readers? 
Business and development are essentially interrelated. You cannot have business without development and vice versa. In Asia, this is how it works.  In development, we are very much interested in education, health systems, environment and policy works. Lots of it also has to do with what we do in our business school. For instance, if we cover education in development, then in business, we need to have people who come to the workforce. So we make sure that the development work runs efficiently but the workforce is also productive as well. For example, the health system is a developmental one. But, the delivery of health services and medicine is a business.  
Similarly, sectors such as microfinance, credit and housing are developmental with business embedded into them. For example, we work with INGOs like Habitat for Humanity, which builts houses for homeless people.   But, we are also interested in the housing industry where the private sector is heavily engaged. So our development and business studies are the two sides of the same coin as they come together. Our business and development students interact with each other because development takes a look at the social side and business takes a look at the industry side. For a system to work, it needs both aspects. 
What are your key findings in the corporate community relations?
We have done a lot of studies regarding Corporate Social Responsibility (CSR). It has five levels as far as AIM is concerned. The first level is the most common where firms make donations and other financial contributions and companies decide to put aside certain funds that they make available to the low income groups. This is a very simplistic view of CSR activity to provide the underprivileged groups with money or resources. It is the most common, basic and easiest way to conduct a CSR activity. However, it is the most unsustainable too. When you give or contribute money, it is not something that is going to last long and change the society. 
The second level is when the companies not only make financial contributions but also allow their employees to work voluntarily in the projects. This kind of voluntarism involves companies more into the social works because now they have to allow their employees to do something. When they do that, it is a little bit more engaging. However, this level is also not very sustainable because the first priority of the volunteers is their job. The helping part is not their job. The third level is little bit more involved in community relations. This is where we have a company which now enters in a relationship with a community or with a sector. With this approach, the relationship lasts longer with the community. Say it is a particular group of women. The relationship becomes stronger when you spend more time with them and put more effort for them. If the companies work with the communities for a year or two, they see them through a particular end. The companies are more committed in this level. But it is not the main business of the company as it is an extra activity for them. 
The fourth level is involving in terms of engagement of companies with the communities. When the firms decide to take the social responsibility and put it into the practice of their business. They start saying ' if we are working with the communities, why don't we work with our employees? Why don't we help our labour force? Why don't we do thing with them rather than going out with outside communities?’ So this becomes a part of their business culture.
The fifth one is the most important as well as the most difficult to do. This is when a company says 'we are going to conduct development activity and that will be a part of business for us.' I can think of some companies in the East Asia such as Manila Water. The firm is a Filipino water company which provides water for Metro manila. Providing water is a profitable as well as a highly regulated business.  When you are supplying water in a big city like Manila, you are providing water for those who can pay for it and those who can barely afford it. So you need to find ways to supply water to everybody. If those who can't afford to buy are nor supplied, they start to steal water. So a company like Manila Water turns around and says, ' let's do this as our business strategy. Not only we will supply water to the people who can afford, but also to the population who can't afford on a subsidized or socialized basis.' 
Another example is the Thai group Charoen Pokphand (CP). The company is in agri-business, it deals with small farmers who are not rich and have to work hard to make things happen.  What CP does is it in effect takes the whole supply chain which is the part of the business including all the small farmers it works with ultimately bringing farmers into its agri-business system. These two are the best examples of CSR activities. The companies are not just voluntarily involved in CSR activities. They have integrated their social responsibility as a part of their business activity. This helps the poor people and includes them into development activities. For me this is the best way to do business. 
Do you have any assessment of CSR activities of Nepali companies?
I do not know enough about Nepali companies yet. We have just started to look into Nepal as a place where we want to bring our students. However, I also want to ask Nepali companies a few questions. Is CSR activity part of their business strategy or just an extra undertaking beside their regular activities? If it is an extra activity, then the question I will ask is how sustainable it is? It is okay if they are helping a group and they have no intention of being there forever. As long it is clear it is fine, but it is difficult when companies leave those groups after a short time who really require a long-term engagement or commitment so that they can do well. Leaving the people after raising their expectations won't do any good. I think that is not CSR. So, I suggest Nepali companies to integrate CSR into their regular business activities. 
Talking about NGOs, many of them are seen just as spending pockets of donor organizations rather than development focused institutions. What is the situation in Philippines? 
There was a time when there were a lot of donors contributing to the development of a nation. For instance, when Philippines went through a democratic change in 1986, lot of money was poured into the country. Similarly, African nations also received large sums of money over the past two decades.  When you have a situation of large funds coming in and the capacity to use those funds is limited, there is a tendency of using money inefficiently.  
Since AIM deals with development management studies, we are very interested in making sure that funds are used properly. By the way, it is not only the NGOs who are in this position. Governments are also in this position. When I was the Undersecretary at the Department of Education, I was in-charge of the largest government budget in the departments of the Philippines government and we had to make sure that it was spent well. Because there is real pressure to spend the money. NGOs are like that. They have to spend the money contributed by the donors. In that process, there are chances of the money being used inefficiently. 
What is needed for the NGOs to properly manage and use the funds they receive? 
What we try to teach the NGOs is maintaining their budgetary discipline. They need to have proper plans to spend the money. This also implies to the governments as well. At times when there is a large inflow of money, government and non-government institutions try to spend the money quickly without testing the results. While I was in the department of education, I used to ask the GOs and NGOs about the most important thing about their work. And they used to tell me thing such as how many meetings they had, how many teachers did they train and how many programmes did they hold. And in response I used to tell them that these things are not the most important part of their work. The most important part of the public education is how many students got graduated. It is not what you put in, it is what you put out. You can conduct many programmes and train many teachers. But if the students aren't graduating or finishing their schooling, then in effect, you have just wasted the resources.  So what we need to do is find ways to keep kids in schools. Similarly, if we try to raise the income of farmers, it is important to see the numbers of farmers in the market rather than the number of farmers trained. In AIM, we are trying to change the orientation of how NGOs and other developmental institutions work. 
What are your key findings on the politics of policy reform?
Policy reform is a difficult subject to deliver on. People have the ideas about what should be, they do not have the patience to deliver. When you implement a policy, it won't bear fruits overnight. An example of this is public education. Say, girls are going to schools and finish up to standard twelve. From the time they start until they finish will take twelve years. So if you want to see success in education, it is not one or two years, it will be over a twelve-year period because any child drops out in between, that already undermines the success of the education policy. Climate change is second example of policy reform.  Climate change is not going to happen in 10-15 years. It will take 25-30 years. 
On the other hand, public health policy is different from the earlier two. You can see difference in public health within a year of implementation. Similarly, executing policies regarding to livelihood and income generation can have changes within a period of a year or two. So the policymakers need to think for the long-term impacts of the implemented policies. They should make sure about the continuation once the policies are announced. The reason why a lot of policies fail is that the politicians or policymakers think that the problems will be solved just by drafting the policies. The implementation is going to solve the problem, not the policy itself. Once the policies are drafted, it becomes responsibility of politicians, governments and bureaucrats to make sure to maintain the consistency for a successful delivery. 
Singapore, for instance, can be taken as a country regarding the consistency and successful delivery of policies. When Lee Kwan Yew, the founder of Singapore, set the policies, Singapore was very consistent for 30-35 years. And as a result, the country rose to prominence in the global arena economically and socially. In contrast, countries like Nepal, Philippines and Thailand start policies but are not able to continue and leave it for someone else to deliver.  However, we have to acknowledge that political and social systems of our countries differ from the island state. We live in democracies where there are different political players who are competing with each other. Meanwhile, in Singapore, there is no such competition. It is a strict society and the state manages outcomes and makes it very clear that one has to abide by those outcomes.  

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