SEATTLE — According to The Economist, around 85 percent of companies worth $1 billion or more in Asia are family-run businesses. This is in stark contrast to the 15 percent of American business in the Fortune Global 500 that are headed by members of the same family.
Family-run businesses have the advantage of a future-focused outlook. Companies in the West can be more worried about their quarterly reports and pleasing their shareholders in the short-term, but the shareholders of family-run businesses have an incentive for focus on the long-term success of their business.
This ownership structure allows family-run businesses to plan far ahead and to embrace inclusive business models that benefit the poor. Inclusive businesses are companies that offer goods, services and job opportunities to low-income communities, while also being commercially viable.
The Asia-Pacific Economic Cooperation is the economic forum that supports sustainable growth and prosperity for the Asia-Pacific region with members that include China, Japan, Mexico and the United States. This economic region encompasses both the East and the West.
Last year’s annual meeting of APEC was in the Philippines, and included a session on inclusive business. Eriko Ishikawa, the global head for Inclusive Business at the International Finance Corporation gave the keynote address for this event.
During his speech, Ishikawa noted that family-run businesses “invest for the long term.” He also remarked that family run businesses have more success with the inclusive business model because they are not just trying to make a quick profit.
Ishikawa’s organization, the IFC, is the private investment arm for the World Bank, which provides funds for inclusive businesses. Since 2005, they have committed over $12.5 billion and worked in over 90 countries, resulting in 250 million people becoming involved in business operations.
The IFC’s work improves people’s lives and creates prosperity while still benefiting the companies that participate. There are numerous examples of this in the host nation, with one being Manila Water, whose parent company Ayala Corporation is a family-run Asian business.
With additional funding from the IFC, Manila Water started the water for the poor service. This program involved the laying of new water pipes for the city to access. This resulted in the price of water dropping almost 150 pesos per cubic meter for 1.6 million low-income residents.
It also increased the network efficiency of water collection for Manila Water and allowed them to recover 700 million liters of water a day. They also saw an 85 percent increase in collection efficiency, since their new pipes solved the problem of illegal connections.
The water for the poor service improved the lives of millions of people, while also helping the business that provided the service. Manila Water is one of many companies using the inclusive business model to benefit the poor while helping their business grow.
With 90 percent of jobs being provided by the private sector, the IFC believes that the inclusive business model is crucial for growth and prosperity.
Sources: APEC 1, APEC 2, Ayala, Inquirer, Economist, IFC
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