Is Asia giving back enough?

IN the 1992 film version of Dominique Lapierre's novel City of Joy, set in the squalor of Kolkata's slums, Patrick Swayze plays a down-in-the-mouth American doctor opposite Om Puri's penurious Indian rickshaw-puller. The story is about small acts of everyday heroism that are the guiding rubric of caring, commitment and community. The film ends with a quote that is flashed across the scene, sans voiceover or any semblance of audio: "All that is not given... is lost." That poignant line has probably haunted everyone who left the theatre that day, almost three decades ago. Today, giving goes beyond unquantifiable random acts of everyday heroism to the headline-making news of High Net Worth Individuals (HNWIs) paying it forward to their communities, even going where governments fear to tread.

While in the West, the wealthy have set up trust foundations and pledged to give away half or more of their wealth - as in The Giving Pledge signed by billionaires Warren Buffett and Bill Gates - in Asia, the perception is that not enough is being done. As of April 2019, the Pledge has 190 signatories: wealthy individuals and couples from 22 countries, mostly from Europe and North America. Only a few Asians such as India's Azim Premji and Hong Kong's Li Ka-shing have set up substantial foundations.

A matter of incentive?

As National University of Singapore economics Professor Sumit Agarwal notes in a March 2019 article titled Why it's time to talk about death and taxes, "whilst the region's wealth has soared, levels of giving have remained relatively static or at best sluggish". He points specifically to Asia's generally low or non-existent levels of inheritance tax, allowing individuals to pass all or most of their wealth on to their families after their death.

In the West, onerous inheritance taxes provide one motivation for the rich to give to charitable causes and reap the rewards of sizeable tax write-offs. In Asia, this incentive is largely absent.

Prof Agarwal points out that Singapore, Hong Kong, Malaysia and India have done away with inheritance taxes, whereas China and Indonesia have never had one. Thailand introduced a relatively modest levy in 2016.

Only Japan and South Korea are prominent exceptions - levying inheritance tax of 50 to 55 per cent on higher-value estates. Today, most major Asian economies have chosen to focus on building low-tax regimes in an effort to encourage entrepreneurship and attract investors, he says.

"For a region that has the fastest-growing number of high net worth individuals, this has a significant impact on levels of giving and philanthropy. According to the latest Hurun Report Global Rich List, as of 2018 there were 2,694 US dollar billionaires in the world, up by 437 from a year earlier. By far the fastest rate of wealth creation is in Asia," argues Prof Agarwal.

"Overall wealth held by the world's super-rich grew by 31 per cent in 2018 to US$10.5 trillion, equivalent to 13.2 per cent of global gross domestic product (GDP). That means an unprecedented block of global wealth lies in the hands of a very few individuals. China had 819 billionaires in 2018, pulling well ahead of the US. Now, it is reasonably safe to say that most billionaires have more than they need."

In the United States, when the 1940s inheritance tax reached 77 per cent, super-rich individuals such as the Rockefellers and the Gettys decided to channel their wealth to funding universities, hospitals, art galleries and libraries, among other high-profile acts of philanthropy. High tax write-offs - up to almost 70 per cent - could also have incentivised the wealthy in France to donate generously to rebuilding efforts when the Notre Dame Cathedral in Paris was almost razed to the ground last month.

According to Wealth-X, which publishes the High Net Worth Handbook, the Asia-Pacific region is forecast to experience the strongest growth in the number of HNWIs and combined wealth. The region's HNW (high net worth) population is projected to increase at a compound annual growth rate of 7.6 per cent over the next five years, with total net worth trailing slightly at 7.5 per cent. In just two years, by 2021, the HNW population of the Asia-Pacific region is expected to overtake even Europe, the Middle East and Africa, the report states.

Prof Agarwal believes that "the introduction of inheritance tax would help to incentivise or nudge rich individuals to use their wealth to benefit social causes".

The Asian way

Mary Ann Tsao's family's Tsao Foundation provides health services at two centres in Singapore that provide medical care for the aged and and the aged poor.

The family's centres strive to go beyond clinical services to include day-care services for the frail, physiotherapy, nutrition and community engagement for the residents. Those who see the specialists at the Tsao Foundation clinics are under the referral programme from the Agency for Integrated Care.

Dr Tsao says that incentivising philanthropy through rigid tax structures may not be right in the context of Asia, a highly complex region with different cultures and social mores. Is it wrong then to surmise that with Asian wealth on the ascendant, Asian billionaires are not stepping up fast enough to the plate?

"I personally don't think such a comparison is useful, though learning from others is. The social and political circumstances in Asia and the West are quite different, so how Asia does philanthropy would also differ," says Dr Tsao.

In the West, where civil society is much more mature and the non-profit sector is well-established and regulated, information on needs and services is more accessible, and there are established non-profit organisations to give to that can deliver impact.

"In Asia, the non-profit sector is still in variable stages of development - many still quite early - in terms of government regulation, available channels of giving, as well as capability to deliver effective programmes and services. Information on issues and needs is also less accessible to donors. Trained professionals in this space are also rare as compared to the West, where the non-profit sector is often pursued as a career with universities offering academic degrees in various aspects of non-profit work," Dr Tsao says.

"In many situations where there is a lack of clearly established channels and charities through which to give, I have observed that Asian HNWIs often need to create and implement programmes themselves in order to address the social and environmental issues at hand. This is far more challenging, of course."

Laurence Lien, another prominent Singapore philanthropist, points out that the Asian context differs from the West in a number of ways. Mr Lien is chairman of the Lien Foundation founded in 1980 by his late grandfather Dr Lien Ying Chow, who donated almost half his wealth to set up the foundation, out of a deep concern for Singapore's poor and those deprived of a chance for a proper education.

Mr Lien says that for one thing, family businesses are more common in the region, and Asian families tend to want to pass their philanthropy on to the next generation. Conversely, Western families may see different generations working independently on different programmes.

Further, religion plays a role. Faith-driven philanthropy is more common in the region, Mr Lien notes. Also complicating matters is the observation that Asian countries are generally not very supportive of philanthropists. "They can be quite suspicious and cynical of philanthropists and their motives, which translates to a lack of support," he explains.

In Indonesia, for instance, the government does not offer philanthropists tax benefits which are as generous as Singapore's.

Does Asia give less?

Says Mr Lien: "Asia is not less generous than the West. Specifically, HNWIs in Asia are also not necessarily less generous than their Western counterparts.

"The US is quite a unique country in its generosity. Total charitable giving in the US in 2017 was US$410 billion, which was about 2.1 per cent of GDP. Total charitable giving in Singapore in 2016 was S$2.86 billion, which was about 0.7 per cent of GDP - one-third that of the US. But there are also many other Western countries that fare similarly poorly against the US.

"The 2016 Charities Aid Foundation report on Gross Domestic Philanthropy, which reports only on individual giving, showed that countries such as South Korea, Singapore and India are more generous than most continental European countries. Generosity is often a function of the depth of civil society and participation, and the degree to which government crowds out private initiative.

"In Asia, the former is often lacking, while the latter differs from country to country. In Western European countries, big government dominates. Taxes are high and most social amenities are state-provided." He adds: "Asians give differently too. Many prefer to give anonymously because they do not want to draw attention to their gifts, either because culturally they believe giving is best given privately or they do not wish to attract unwanted attention from government authorities and officials."

Malaysian businessman and philanthropist Ruben Emir Gnanalingam believes acts of charity by wealthy individuals in Asia largely go unnoticed, and that is the way HNWIs prefer it in this part of the world. "I think as a proportion of wealth, HNWIs in Asia probably do more for their communities. We always hear about stories about certain individuals in the West but that is not necessarily the average standard. HNWIs everywhere sometimes prefer to just focus on the community rather than the publicity," says Mr Gnanalingam, whose father Tan Sri G Gnanalingam is on Forbes' billionaires list.

The elder Mr Gnanalingam made his fortune through Westports, which manages port operations dealing with container and conventional cargo. Ruben is currently group managing director of Westports Holdings Bhd, and is expected to take over the expansion of Westports.

He thinks the comparison between the East and West in philanthropy is flawed: "Different cultures need to do things differently and everyone needs to develop and grow at their own pace. Also, it is hard to get real data as not all philanthropy and community work is publicised."

All in the family business

Mr Lien further illustrates why comparing the Asian context and its many complexities to the West is akin to comparing chalk with cheese: "Many Asian UHNWI's (ultra-high net worth individuals) assets have yet to be decoupled from their family businesses. A lot of the philanthropy is done through their corporate foundations or as CSR (corporate social responsibility). More than in the West, next generation family members are often involved in the businesses that the first generation wealth creators started.

How then does one strike a balance between giving and building the family business, and how can Asian wealth be better channelled to help solve social and economic issues in the region?

Dr Tsao says: "Effective giving also requires deliberate intention and intelligent effort."

Dr Tsao's grandmother, Tsao Ng Yu Shun, at the age of 86 established the Tsao Foundation in Singapore 18 years ago, to enhance the quality of life of older generations in Singapore, in honour of her father and father-in-law.

Having lived among older relatives to whom she was also caregiver, she empathised deeply with under-resourced seniors with little recourse to help.

"In my family," notes Dr Tsao, "we consider social good an equally important outcome as profit-making in how we do our business. We have two approaches."

The first is traditional philanthropy: "While we have a philanthropic arm for which we have defined purposes, the development of an effective strategy and implementation plan has been more challenging than that for our businesses because of the reasons highlighted above.

"We are engaged in a continued effort to refine and strengthen our giving in an organised and systematic way as to how much to give, how to give, and most importantly, what impact we are aiming to deliver. It's early days for us yet as we are still developing a philanthropic framework and infrastructure, similar to that for our business, so we can be optimally impactful in our giving. We are still working on this."

The second approach the Tsao Foundation draws on is from the view of business itself as a force for good: "It's not just about making money on one hand in whichever way and then giving it away (as CSR or philanthropy), but the business itself should be a vehicle for positive change by creating social impact through the way we make investments and conduct our businesses.

"This requires transforming our businesses - be it divesting businesses and investments that we don't believe in (such as oil and gas, extractives, tobacco, etc), or investing in or developing enterprises that create positive environmental and social impact (such as renewable energies, businesses that create employment and/or benefits for the underserved, etc)."

This approach to philanthropy is increasingly catching on in the developed world, where "the importance of ESG (environmental, social and governance) guidelines, delivery and reporting are becoming more prominent", Dr Tsao notes.

"This is more so in the West, but among a small group of Asian businesses - especially family businesses - this focus on ESG has become a central purpose of their profit. My family business is a founding member of FBNA (Family Business Network Asia, a chapter of FBN International) and we fully embrace its charter of the care of people and the planet as a central philosophy of how we do our business," adds Dr Tsao.

What more can be done?

Mr Lien, a former Nominated Member of Parliament, also advocates for more collaboration in order to work out solutions that will cater to Asia's specific needs.

Mr Lien is today the chief executive of the Asia Philanthropy Circle (APC), a donor platform started in 2015 which brings Asian philanthropists - private individuals, families or foundations - together to address the region's social challenges. "I strongly believe philanthropists can be change agents in Asia and contribute significantly more to the development of the region," he says.

A board of six experienced philanthropists guides and oversees the APC. Among its early founders are Stanley Tan (the former chairman of the National Volunteer and Philanthropy Centre), Cherie Nursalim and Mr Lien. Instead of merely copying from the West, the APC intends to evolve a uniquely Asian type of philanthropy. Even so, could better incentives help nudge those in Asia to put their wealth to good causes, as Prof Agarwal believes?

Dr Tsao says: "In Singapore, I don't think the absence of inheritance tax would discourage giving, as giving as an estate tax management strategy hasn't really yet been established as a common practice in Asia. Furthermore, giving in Singapore is also very sufficiently rewarded by 250 per cent tax deduction.

"That said," she adds, "I'd like to think that giving by HNWIs is just starting in Singapore, especially with the millennials, who tend to be much more socially responsible and inclined to give because it's the right thing to do."

Mr Lien says that part of the motivation of APC is to distil models of Asian philanthropy that fit the Asian context, so that there is less copying from Western models.

"I do not believe that tax incentives make people more generous. They may give more, because their capacity to give is increased due to the tax savings, or they may time their gifts to benefit more from the tax deduction."

Still, "I agree that HNWIs, as a specific group, have the capacity to give much more - both in Asia and the West. Social problems have become more complex and HNWIs, with their long-term funding and entrepreneurial skills, can play a major role in being problem-solvers.

"To move the needle on addressing the SDGs (Sustainable Development Goals), philanthropists can do more by collaborating - sharing best practices, and pooling resources and collective intelligence to achieve greater social impact."

According to Mr Lien, Asian philanthropists have the added disadvantage of working mostly in environments in which NGOs are under-developed. "We need to work together to develop capacity in the social and philanthropy sector. We need to be more experimental, particularly in designing lower cost, scalable solutions, as models from the West are often too resource-intensive," he says.

For Mr Gnanalingam, this means focusing on communities. "Today, (Westports') CSR focus is the island of Pulau Indah. It is our community and we want to make it a better place for everyone working and living there.

"Making sure no one is left behind and that there are opportunities for everyone is crucial for us. We have reduced poverty and crime, created thousands of jobs and enhanced education platforms for all the kids on the island."