It’s real progress that counts
The cover of the August 6 issue of FORTUNE depicts the British Pound and the American Dollar as professional boxers, accompanied by the headline, “London vs. New York: Will the real financial capital of the world please stand up?” For those of you who have read the article, you must have been impressed as I was with the recounting of London’s march to preeminence among the world’s leading financial centers.
Written by Peter Gumbel, the article begins by recounting remarks by then British Prime Minister-to-be Gordon Brown at a recent black-tie London dinner for bankers. He proclaimed to those in attendance, “Today, over 40% of the world’s foreign equities are traded here, more than New York. Over 30% of the world’s currency exchanges take place here, more than New York and Tokyo combined. And while New York and Tokyo are reliant mainly on their large American and Asian domestic markets, 80% of our business is international.”
Brown concluded that London’s emergence as a – and perhaps the – global financial center in a little more than half a decade marks “the beginning of a new Golden Age.” Indeed, the London over-the-counter market called AIM “raised as much in IPOs last year as Nasdaq,” according to Gumbel’s report, and “MasterCard is just the latest organization to publish a study, in June, which ranked London ahead of New York as the world’s top center for commerce.”
London’s success is the result of its opening to global commerce and investors while the U.S. insists on making it harder politically, legally, and administratively to do business. The 2002 Sarbanes-Oxley Act and activist regulators, a propensity for litigation and class-action suits, and tax laws that require residents and citizens to pay income tax on global income are just a few of the hurdles investors face in the U.S. Meanwhile, Gumbel reports that, “London has put in place a new, lighter, and altogether more flexible regulatory approach that makes it easy to do business, regardless of nationality, currency, or accounting system.
Gumbel’s article reminded me of remarks by Cesar B. Bautista, who is co-chairman of the Philippine’s National Competitiveness Council and a former secretary of trade, at the recent League of Corporate Foundation conference, Putting CSR to the Test. Bautista’s remarks focused on the relationship between corporate social responsibility and national competitiveness. Indeed, the two go hand-in-hand.
Places that provide a competitive business environment create more highly profitable, global-industry leading enterprises than less-competitive places, as the “competition” between New York and London demonstrates. And many profitable companies are much more capable of making a meaningful CSR impact than a smaller number of less profitable companies. Improving national competitiveness therefore does more than create jobs; it creates opportunities for CSR beneficiaries who otherwise would be neglected.
That’s assuming of course that global corporations are going to be socially responsible, but there is a groundswell of evidence suggesting this is the case. Not just because executives feel morally obligated to give something back, but because it makes business sense. First, prosperous markets benefit corporations, and CSR empowers beneficiaries, and fosters financial self-reliance. Second, CSR initiatives provide substantial goodwill for corporate brands, enhancing loyalty and recall.
The Philippines’ National Competitiveness Council was created by Executive Order 571 late last year following a national competitiveness summit. That summit came on the heels of the 2006 World Competitiveness Yearbook survey announcing that the Philippines had fallen to 49th place, out of 61 countries surveyed, in terms of its global competitiveness. Bautista, co-chair Department of Trade & Industry secretary Peter V. Favila and four Council members have established for themselves a number of important goals. They are contained in Bautista’s report, which can be downloaded here.
Those directly related to global commerce are categorized as “Transaction Flows & Costs.” The Council proposes to: 1) Facilitate the entry and exit of business people; 2) Simplify the way of starting, maintaining, and closing a business; 3) Institutionalize the regulatory impact assessment of old and new government requirements; and, 4) Streamline a national investment assistance system.
While these goals are laudable, there’s regrettably little evidence that much is being done. And the notion of “institutionalizing regulatory impact assessment” itself reeks of bureaucratese, quickly deflating enthusiasm for the Council’s work. In fact, if London can quickly “put in place a new, lighter, and altogether more flexible regulatory approach that makes it easy to do business” for everyone; well, why can’t the Philippines do so as well? Creating another agency is easy; but real progress is what counts.
Gumbel concludes his article by musing that London “has opened up to the world, and the world has come flocking. The question is how long it will be before New York and a host of other cities follow suit?”
And the question for those of us in the Philippines is: How long will it be before Manila follows their example?