Speech by British Ambassador Asif Ahmad during the Philippine Business for Social Progress’ Annual Membership Meeting and Foundation Day, January 24, 2017 at the Makati shangri-La Hotel, Makati City

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I am truly humbled to be given this opportunity to share some thoughts on how government, business and the community can deliver inclusive growth. Humbled, because your board of trustees and indeed the audience here today, are far more qualified and experienced than I am.

To do some justice to this important topic, perhaps you will allow me to draw on the history of Corporate Social Responsibility in Great Britain.

My personal perspective has been shaped by my good fortune of spending my childhood and adult life in many parts of the world. I lived through the swinging sixties in Great Britain, I saw abject poverty and civil war in Bangladesh. I was in Beijing during Chairman Mao’s revolution in China and later witnessed the increasing separation of wealth in Iran at the time of the Shah.

In my professional career, as a banker for 18 years, I was exposed to the biggest corporations on the planet; the billionaires who opened accounts in the private banking operations I set up in Hong Kong, Singapore and the USA. I worked particularly closely with small businesses in the richest and the poorest parts of London. And when you handle the personal banking needs of individuals, you come across the whole spectrum of the challenges, opportunities and crises that people face. Some of those where the lucky ones; at least they had a bank account. Here in the Philippines and indeed in many parts of the world, a large number of people are excluded from the banking and financial sector.

In 1981, in the UK, we paid the price for exclusion. Riots broke out in our cities, banks were burnt down. It seemed at the time, centuries of investment in the community, economic reform, and social welfare had failed. How did we get into this mess and what did we learn?

If you look at the history of the United Kingdom, you will see that government acting for the good of the community was not our original practice. The name of our country explains why. As a Kingdom we were ruled by Royal families. The Kings and Queen’s levied taxes on wealthy landowners and then on business people. That money funded the castles, monuments and lifestyles of the aristocratic rulers. And it also funded their wars when rival Royals all over Europe fought for the Crown. If a road was made, then the users paid a toll.

The concept of a businessman looking after his employees began on farms. Labourers needed housing, so some cottages were built. They were given some food. Payment was usually in kind and later in some form of money. Wealthy patrons supported some artists like painters, sculptors and writers. Construction workers found their livelihoods from projects that the rich commissioned. For hundreds of years, that was the model of CSR in Great Britain but the term was not yet invented.

The first towns and London as a city grew through traders in markets. Businesses paid for the few roads and public buildings. There were no services for ordinary citizens, no public toilets, no low cost social housing. We became a nation of beer drinkers not just because we brewed good beer but because our water was awful. There were some examples of businesses providing facilities for workers in the mining industry. But these were very humble, very basic dwellings in remote places.

The big change came with a British invention that changed our world, your world, for ever. This invention was the steam engine. That meant from the year 1755 onwards, instead of making cloth by hand or water driven looms, machines were used in factories.

Steam engines powered trains and ships. And with that, Great Britain rose to its peak as a world power by 1850.

In one hundred years, Britain had moved from being a rural society to one with increasing numbers of people living in cities. This meant that workers lived in communities near factories. Poor housing, poor quality food and very few public facilities created acute social problems in urban Britain. If a person lost his job or fell sick, the consequences were terrible. For most factory owners, their priority was not social welfare. There was no shortage of labour and what could not be done in Britain could be made in the colonies in India. One of the most shameful episodes of British history was the role businessmen played in capturing people, selling them and using human beings as slaves. People with a social conscience eventually campaigned against slavery and it was abolished.

The first institutions to care for needs of society were motivated by religion. Charities came in to rescue vulnerable women, orphans and others in need. Temperance movements helped alcoholics. The source of funding was philanthropy and donations.

Workers had few rights and very little protection from exploitation. There were very few examples of good governance and government intervention. But there were some businessmen who began to understand that they had to nurture the community from which they drew their work force. One of the pioneers of CSR in Britain was Cadbury’s. You will know them for their great chocolates. When Cadbury’s moved to a new factory site in Birmingham, they did not just invest in factories. They built a green garden environment. They built housing with the welfare of workers and their families in mind. Another maker of confectionary, Rowntree invested in hospitals, baths and parks. Lever Brothers who are known today as Unilever invented the bar of soap. This meant that ordinary labourers could afford to buy soap to wash themselves. So from today, whenever you have a bar of soap in your hand, remember it was because a British company wanted everyone to have the opportunity to be clean, not just the rich people. Lever Brothers also introduced the idea of an 8 hour working day, canteens where employees could eat and paid sick leave. These are all things you take for granted now but the original idea came from Britain.

Workers gradually got legal backing for collective bargaining and we saw the birth of trade unions. Governments on a local municipal level started to assume responsibility for basic services such as water supply and sewage. The role of central Government in sustaining communities on a national level was a product of World War II. In 1945, Britain emerged from the war with damaged communities, a shrinking empire and a compelling need for reconstruction not just of buildings but the quality of life of ordinary people. The welfare state, our national health service, a system of social taxes all grew in strength and scope from the ashes of the war.

The philosophy driving government economic policy at the time was state control of essential businesses like transport and power. But that philosophy gave way to market led economics. Businesses wanted to be free to compete and in turn, the theory was that people would prosper. Communities would thrive and we would live long happy lives. For a while, economic liberalism worked well. From the 1960’s, in the time of the Beatles and the mini skirt, Britain found a new confidence. Technology transformed lives at home as well as in the work place. However, economic liberalism was not cost free. Intensive manufacturing and using coal to generate electricity caused pollution. Public health suffered. The response of government was to use the law to stop harmful emissions. Legislation was tightened to promote health and safety at work. This was particularly important in the mining industry which had a poor history.

The challenge to economic liberalism in Britain came in the 1970’s. Oil price rises, inflation, low wages and high unemployment cast a dark shadow on the decade.

This is what I spoke of earlier. In 1981, violence broke out in London, Liverpool and many other parts of the UK. Miners and trade unionists were confronted by riot police. Britain looked at times like a war zone. The government responded with policies that targeted the urgent needs of deprived communities. Investment in the environment, transport and education was stepped up. But this time, it was done differently. Government and business acted together. British companies came together to form an organisation called Business in the Community. The One Per Cent Club was a pledge by major corporate to return some of their profits back to society. This was a clear signal that business managers saw a clear connection between making a profit and the prosperity of the community.

We saw the birth of the concept of PPP, public private partnership. Traditional government activities such as transport, power, water, public buildings were passed on to the private sector in the form of concessions, joint ventures and turnkey projects. The role of government has moved from direct intervention to one of enabling people and businesses to improve their communities.

Good governance has manifested itself by setting high level legislation covering issues such as consumer and environment protection. Transparency has improved with our Freedom of Information law and practices. Corruption is being fought by the strongest laws against bribery in the world. No company big or small is spared as you will note from recent examples.

Looking at where we are now, I think we will have to move into yet another model of how business, government and the community interest work. Throughout the world I see the rise of the universal consumer. Some see it as populism or a challenge to globalisation. I see it as a phenomena where Individuals are making decisions based on many influences.

Through the internet and digital media they not only see what choices they have and execute transactions. They can set trends. People get to see product endorsements by celebrities or their own peer group. Consumers also hear about bad news stories. When garment workers die in factory fires in Bangladesh, they question whether the owners of the brands are responsible. When people hear about children being forced to make shoes for very little money, shoppers want to be reassured that the pain of wearing high heels is for you ladies to bear not the kids making the shoes.

When a story breaks about damage to the environment from oil tankers or mines, companies and governments react faster because the individual consumer is already aware of the harm done to their world. People are making choices about fish and seafood they eat. They don’t want coral reefs to be blown up for their food. Consumers want to know how their fruit and vegetables are grown, what chemicals were used and what conditions farm labourers work in.

This new dynamic will shape how CSR, good governance and sustainable development evolves in the future, our future.

So far I have talked about our topic from the perspective of the United Kingdom. What are the implications for the Philippines? Firstly, many of the experiences and concepts of Britain have had an impact here. Like Britain, the first move to help the community came from people of religion. The missionaries focused on welfare, education and helping vulnerable people. Some wealthy people became patrons of causes that they cared about.

Whilst Europe moved from the period of feudal landlords and an unequal power relationship with ordinary citizens many years ago, the Philippines has not yet completed the transition. The transition of shifting power and influence from those who control economic wealth to an empowered consumer.

Land is held by a small group of families. More attention is needed on how land is used and how the land benefits the community as a whole. Although I see many improvements, businesses still have a rent seeking characteristic. That means that more is extracted from the community than what is given back. But change is coming.

The bigger companies here have foundations that support a number of community projects. That is how British businesses were in the early phase of CSR. There is a need to move on to more enlightened CSR. That is where your work in the PBSP is inspirational.

Trade unions have been formed in the Philippines and they have a place in negotiating with employers. But some are still viewed with suspicion and seen as a threat to profits rather than a partner for future prosperity.

Government here has met some of the needs of the community. Municipalities have started to take responsibility for some essential services. There are more laws and practices defining the relationships between business and people. Employees in the Philippines have defined working hours, rights to sick pay. There is a state social security system. Phil Health is increasing its coverage for employees. Much progress has been made and if the economy continues to grow then society will also prosper.

The challenges are many. Economic growth in the country has not yet trickled down enough. 25 per cent of the people of this country live in internationally defined poverty. They have less than a dollar a day to live on. In Samar and parts of Mindanao, over 60 per cent live below the poverty line. 60 per cent of Filipinos, meaning 60 million people have never seen a doctor. Like the conditions that existed in Britain over a hundred years ago, a large number of Filipinos do not have access to their own toilet or shower room. Housing conditions are poor, as poor as the ones we had at the start of our Industrial Revolution in the 1850’s. Unless social housing becomes a bigger part of the business model in the Philippines where people can live close to where they work, there will come a day when Makati businesses will be short of essential workers. Not because they don’t want to work but because they cannot afford to come to work. If it takes a low paid worker 3 hours to get to work and another 3 to get home, the temptation to join 11 million OFWs is obvious.

We are seeing PPP as a way for business to deliver infrastructure projects in the Philippines. But modern transport systems are internationally priced. There is no cheap way to bore tunnels and run subway trains. Employers here will have to do what we did in the UK, add the cost of commuting to the wages of workers. In factories, health and safety rules are not always obeyed. Fires have claimed the lives of workers as a result. Contractualisation has its place for short term projects. But it is wrong when it is used to avoid statutory obligations. I know of employers who pass around workers from one factory owner to another every 5 months. Even in modern call centres here, employers terminate people within 5 months. In some cases the practice is that an employer replaces the breadwinner with another member of his or her family on a rotational basis. This is both immoral and not a sustainable business model.

In rural areas, the social needs are also very acute. In plantations in places like Bukidnon, farm labourers sleep in shelters that would be unsuitable for animals let alone people. It is not surprising that the reaction is at time violent. Subsistence farmers have limited access to markets as they lack infrastructure. There was a time when roads were deliberately not built to connect farms to market. Middle men and the end user in Manila have to be willing to pay the producer enough to lift the farm labourer from a state of poverty.

Cooperatives and credit unions within communities have not reached their true potential here. The poor pay more for credit than they can afford. 5/6 lending won’t stop unless there are accessible alternatives. The poor pay more for small packets of food or medicine than those who buy bigger quantities. The unit price of such products is higher.

Decades of corruption have robbed communities of the benefits of government expenditure. In parts of the country where funds were allocated for schools there are no buildings. Where there are buildings there are no teachers. And where they have both buildings and teacher, the students don’t have money for shoes, paper, or food. I am deeply moved each time I see children crossing rivers and walking for hours just to feed their hunger for knowledge.

If I have painted a negative picture of the situation here, the intention is not to be just critical. You are the future of the Philippines and you can and are making a difference.

The United Kingdom is with you. Our commitment to the Philippines, as a government, is to work with you so that your country prospers. As an emerging economic power, we see the Philippines as significant partner with whom our ties will go stronger in the next 30 years. As part of the UK’s commitment to spend 0.7 per cent of our Gross National Income on foreign aid, we have supported the Philippines. The UN listed the UK as the number 1 donor for the victims of Typhoon Yolanda. The people of Britain as taxpayers and private contributors spent 14 billion pesos in urgent and more longer term assistance. As part of our membership of the European Union, we also have programmes that cover areas like education and health. In the coming year, we will focus further on good governance. That will involve partners like the Sandiganbayan, and departments including trade, energy and natural resources and health. We will continue our advocacy for removing barriers to foreign investment. Apart from creating jobs in the Philippines and paying taxes, our businesses will bring with them their good practice in corporate social responsibility. Our mining, energy and manufacturing companies will come with their strong commitment to sustainable development. They will invest in green, low carbon assets. Their business ethics will set a good example for others to follow. That will affect employees, consumers and in turn the Philippines as a whole.

But foreigners alone cannot move the Philippines faster down the path of good governance, CSR and sustainable development. More fundamentally, businesses in the country need to come the same conclusion that Cadburys, Rowntrees and Lever Brothers reached in the 1900s. Philippine businesses need to invest more in the community and the welfare of employees. That is how you create customers who can afford to buy your products and services. That is how you sustain development.

I have every confidence that the Philippines has a brighter future. When I interact with people like you, my faith in the country gets stronger. I am sure you will build the Philippines of the future, a future where business and the community work for a common purpose. Where there is a clear understanding that healthy, better paid and educated citizens create the conditions business need to make profits. Some of those profits need to return to the community in the form of taxes. But above all, businesses have to adopt practices that sustain development and not extract diminishing resources.

Let’s work together for a better future for all of us.

Thank you very much for giving me this opportunity to speak to you this afternoon.