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Can businesses do good and prosper?
THERE is a strong interdependency between commitment to sustainable development and commercial success. We believe that, in the future, companies that will outperform the market are those that operate with a strong sense of purpose and make a genuine commitment to sustainable development. A 2017 report by Deloitte indicated that a set of billion-dollar companies making a strong commitment to sustainability is estimated to have out-performed competitors in the stock market by 11 per cent.
This interdependency is accentuated in the era of digital disruption. Like never before, digital is playing its role of connecting ecosystems of stakeholders, thus creating greater leverage on the impact of business actions. This is forcing businesses to look beyond the customary lenses of desirability, feasibility and viability when evaluating their forays, and to add another lens - relevancy of their actions towards a sustainable society. The rapid advent of digital will make businesses harness the power of ecosystems to drive both social good and financial success - we call this #DigitalforSocialGood.
REPURPOSING THE RURAL OPPORTUNITY IN ASEAN
Based on our recently completed study, globally, rural redevelopment has the potential to unlock US$1 trillion of annual output by 2025, boosting the current baseline rural GDP of US$13.2 trillion by 7.5 per cent to US$14.2 trillion. In South-east Asia, the rural opportunity (in terms of rural GDP) has the potential to be a total of US$1.42 trillion by 2025, corresponding to an approximately 30 per cent share of Southeast Asia's GDP in 2025.
This, coupled with the fact that rural areas will still be home to almost 47 per cent of the Asean population by 2025, offers a multi-trillion economic opportunity for businesses who adopt a purpose-driven approach to help solve problems beyond just the urban centres and cities.
This same study explored how businesses should approach this opportunity in South-east Asia. Two ecosystems that are central to the rural economy were assessed - farm-to-fork and learn-to-earn. These are high potential areas where #DigitalforSocialGood can be put into action.
For South-east Asia economies, the farm-to-fork value chain is vital, not only to take on the global challenge of providing adequate, safe and nutritious food supply, but also because it provides a source of income for 38 per cent of the region's 648 million population who are employed in the agri-goods industry. Tackling farm-to-fork challenges presents significant opportunities for businesses to generate an additional US$370 billion GDP uplift to Southeast Asia's economy by 2025.
#DigitalforSocialGood can disrupt the conventional linear value chain to something that is more dynamic and interconnected. Essentially, a traditional agriculture player can now partner with non-traditional adjacent industry players through digital means to co-create solutions that did not exist in the past and unlock value that was not feasible to capitalise in the non-digital era.
For example, crop insurance has largely been unavailable to small holding farmers due to prohibitive costs of administration and high risks. To overcome this, telco operators in Kenya are leveraging low-cost mobile phone payment systems and solar powered weather stations to offer farmers "pay as you plant" insurance. Local agro-dealers use camera phones to scan barcodes that immediately register the farmers with the insurance company. During bad weather conditions, the affected farmers can automatically receive payouts via mobile transfers.
LEARN-TO-EARN IN THE DIGITAL ECONOMY
In South-east Asia, MSMEs (Micro, Small & Medium Enterprises) represent almost 99 per cent of all businesses and influence millions of lives and jobs. The micro-enterprise segment, in particular, represents close to 90 per cent of firms, or about 55 million enterprises, and contribute 41 per cent to employment but only 15 per cent to GDP. However, research shows that productivity of these micro enterprises is 25-30 per cent lower than that of small and medium enterprises. These firms, predominantly in rural areas, are hindered by a lack of basic access to skills, infrastructure and capital.
As a significant proportion of micro enterprises in the region are "offline", digitising this segment would see multiplier effects in terms of increased revenue and greater productivity - for instance, greater access to skills, higher job creation rate, increased access to export markets, greater innovation, lower export and transaction costs, and reduced time to market. These effects can result in a 4-5 per cent uplift in GDP, which translates to about US$200-250 billion.
As an example, a major e-commerce provider launched a rural academy to help rural firms enhance their digital literacy. The focus was to coach the rural MSMEs to use digital tools to expand their market presence as well as connect and engage with their customers and other communities. Since the launch, the programme helped over 2,000 MSMEs and enabled 60 per cent of them to go global on the back of an e-commerce platform. Other examples include how banks have collaborated with fintechs to improve MSMEs' loan approval rates and how telcos, banks and tech firms have collaborated to bank the unbanked rural businesses.
The intent of the farm-to-fork and learn-to-earn examples is two-fold. Firstly, it shows that digital is not a privilege of the middle/upper-class urban dwellers but rather, it can be extended to rural and semi-urban societies as well. Secondly, the key to unlocking value through digital is to nurture a "collaborative tech" ecosystem consisting of traditional players with domain expertise and non-traditional players who understand how to leverage digital to harness a broad set of opportunities.
Urbanisation is a key megatrend. However, solving for urbanisation alone will not be enough to weather the effects of economic uncertainties and secure sustainable growth. In fact, despite rapid urbanisation, almost 50 per cent of the South-east Asia population continues to live in rural areas, and by 2025 this figure will remain sizeable at 47 per cent. Taking bold actions to nurture a collaborative tech ecosystem for the rural and semi-urban regions could be the alternative and the most important pathway to drive equitable growth in South-east Asia.
- The writers, from Monitor Deloitte, are respectively Asia Pacific Co-Leader, South-east Asia Director and South-east Asia Senior Manager.