According to the Doing Good Index 2022, which analyses the social investment landscape in Asia, Covid-19 has exacerbated social disparities and income inequalities and across the region. We talk to Dr. Ruth Shapiro, the Co-Founder and Chief Executive of the Centre for Asian Philanthropy and Society (CAPS), which conducts the study biennially, about the pandemic’s impact on people in Asia, her work and improving Hong Kong’s social sector.
In conversation with Ruth Shapiro of the Centre for Asia Philanthropy and Society
What is The Doing Good Index?
Started in 2018, The Doing Good Index (DGI) is a biennial flagship study by The Centre for Asia Philanthropy and Society (CAPS) that examines the social investment landscape across Asian economies, providing evidence-based findings on how these economies are or are not enabling the public, private and social sectors to work together to address our common problems and contribute to continued economic and social vitality.
Before we go into the details about DGI, I wish to share some background information about our organisation. CAPS was established in 2013 in Hong Kong as an action-oriented research and advisory organisation committed to maximising private resources going toward doing good in Asia. We accomplish the mission by understanding fundamental strengths and cultural practices in Asia as well as researching and promoting public policies that best enable the giving and receiving of private social investment.
The Doing Good Index 2022 has surveyed a total of 2,239 social delivery organisations (SDOs) and interviewed 126 experts across 17 Asian economies. We are proud to say that we are the most comprehensive social impact index in Asia, where we evaluate systems in place to meet the most pressing issues in the social sector.
From our research, we see that Asian philanthropy is still largely held back from reaching its full potential by a trust deficit and underlying structural conditions. DGI2022 has identified four pan-regional trends:
1) Trust deficit among sectors impacting the power of collaboration: The lack of trust among the government, private, and social sectors remain the foremost impediment to creating a supportive and enabling environment for the flow of private social investment. As a result, many Asian governments have put in place regulations that limit the social sector’s freedom and flexibility to operate, thus impacting donors’ motivations to engage with them. This results in a loss of both funding as well as talent to the sector, in turn reducing its capacity to deliver on its objectives.
2) Ambiguous policies and government oversight driving away donors: Throughout Asia, governments have enacted ambiguous policies governing philanthropy, corporate social responsibility (CSR), and the social sector in general, which, at times, seem to work against each other. These mixed messages dilute the incentivizing potential of their fiscal policies to encourage systemic philanthropic giving, ultimately translating into a lack of support for the social sector.
3) Funding to the social sector characterised by shortfalls: Almost half (47%) of social delivery organisations (SDOs) in Asia have reported a decline in funding, with 75% of those reporting a decrease of up to 50%. A number of factors have contributed to this shortfall including diminished foreign funding as a result of regional affluence, companies and donors redirecting their funding to other areas or opting to engage in humanitarian work themselves in the wake of the pandemic, and the zero-sum nature of Covid-19 support. At the same time, eight of the 17 governments in Asia have enacted policies that make it more difficult for foreign funds to enter the country. Few economies have been successful in leveraging domestic and government funding to close the funding gap.
4) Synergies among the sectors imperative for a vibrant social sector ecosystem: Despite unrivalled challenges and structural impediments, Asia’s social sector has demonstrated its capacity as a trusted partner for sustainable development, working with governments, companies, and philanthropists to build back better. However, as the Covid-19 crisis abates, it will be critical to harness the strengths of all parts of society – government, private and social sectors, and individuals – and maximize collaboration to drive long-lasting change in the direction of inclusive and sustainable development. Addressing the region’s unmet social needs will require a coordinated “all-hands-on-deck” approach that includes not only funding but also talent, knowledge and a shared commitment towards the most vulnerable in our communities.
We believe philanthropy and other types of private social investment can be accelerated with the right incentives and policies in place, and that the time to act is now. In producing the Doing Good Index, CAPS hopes to assist the region to realise its potential as a global leader in social innovation.
Who is doing well in Asia, and why?
The DGI clusters economies into four distinct groups – Doing Well, Doing Better, Doing Okay, and Not Doing Enough – to measure their performance in creating a conducive environment for doing good. These economies were measured with 35 indicators under four sub-indices – Regulations, Tax and Fiscal Policy, Ecosystem, and Procurement.
Encouragingly, all the 17 Asian economies in our study have deployed practices conducive to private social investment. However, the two countries that have consistently maintained their position at the top of the Index with the most favourable conditions for philanthropy are Singapore and Taiwan. In both countries, the governments recognise the social sector as a key partner and have put in place policies and programs which enable the sector to thrive.
Singapore and Taiwan’s enabling regulatory framework allows non-profit organisations, social enterprises, and philanthropic capital to not only operate with relatively little friction but with important incentives and encouragement. Both economies have enacted clear and straightforward regulations that allow the unrestricted flow of funds and for those funds to reach the social sector.
Furthermore, Singapore and Taiwan’s favourable tax policies encourage philanthropic giving. Singapore is the only economy to have a tax deduction rate of 250% for charitable donations and no limit on the eligible income. Taiwan, on the other hand, encourages charitable bequest through tax incentives. The process for claiming tax incentives is unambiguous in both economies, and neither limit charitable tax incentives deductions for certain sectors.
How has Covid-19 impacted the way social sectors in Hong Kong operate?
Covid-19 has exacerbated income inequalities and social disparities across Asia, serving as a force multiplier for trends already in place. We have identified three key developments triggered by the pandemic:
1) Forcing an immediate and united response: As a result of Covid-19, individuals, companies, and governments tended to be much localized, informal and, at times, impromptu to react to local needs.
2) Asian governments’ responses varied greatly: In many cases, the local governments put in place new and often conflicting policies in an effort to both ensure public health but in some cases, to utilise the pandemic to increase government control.
3) Accelerating existing trends: The pandemic did not so much create new trends but accelerated those already in place. Income, educational and social disparities have increased. On the positive side, use of technology and grassroot collaborations have also proliferated.
The social sector has demonstrated remarkable resilience amidst the crisis, oftentimes even stepping up in a significant way to help those harmed by the pandemic.
Why is now a critical point in time for The Doing Good Index?
Two years of living through a global pandemic has been tough for all, but it has been particularly difficult for the most vulnerable communities in our society. Covid-19 has pushed millions of people into poverty across Asia – more than two-thirds of the those newly forced into poverty live in South Asia, East Asia, and the Pacific.
Now is the time for increasing private resources going toward doing good in Asia, and DGI shows how and who needs to be involved. It provides a roadmap of the policies and practices that can unleash this capital by aligning incentives around doing good and mitigating the trust deficit to maximise private social investment flowing toward helping our countries and communities. In a post-pandemic world, all parts of society – government, private and social sectors, and individuals – need to work together to rebuild a stronger and more equitable Asia.
Where does Hong Kong sit in the Doing Good Index?
Hong Kong has maintained its position in the ‘Doing Better’ cluster of the Index from 2020. What this means is that while Hong Kong is performing well in some respects, there is still room for improvement in others.
When we take a closer look at the four sub-indices, we see that Hong Kong has relatively less favourable tax incentives for charitable giving – although it has a 100% tax deduction rate for both individual and corporate donors, its incentivising potential is held back by the limit placed on the eligible income for tax incentives. Despite that, Hong Kong’s social sector has a strong domestic engagement with 97% of SDOs receiving donations from individuals and foundations – the highest in Asia.
It also receives the highest funding in Asia from the corporate sector where Hong Kong is one of eight economies in Asia which encourages companies to engage in CSR activities which drives more resources to organisations working with on addressing societal challenges.
While the ecosystem for corporate and philanthropic giving is conducive, the process of setting up an SDO itself can be challenging as Hong Kong has the slowest SDO registration process in the entire region, taking organisations up to a year to receive a tax-exempt charity status, nearly three times the Asian average of four months.
What is the biggest issue facing Hong Kong’s social sector today?
Even before the pandemic, in 2019, Hong Kong has already recorded its highest Gini coefficient in 45 years, meaning a huge economic inequality in our population.
Hong Kong has 9,560 tax-exempt charities which focus on education, environmental protection, and the welfare of children. According to the Doing Good Index, 68% report increased demand for their services during Covid-19, but local grassroots organisations find fundraising and staffing to be significant challenges with 65%of those surveyed reporting that recruiting staff to be difficult.
Partially because there is not a delegated charity oversight agency in Hong Kong, decisions on tax exemption status are made by the Internal Revenue Department which has limited capacity to understand the programs and missions of organizations, leading to a longest lead time amongst Asia for SDOs to obtain tax-exempt status.
The government in Hong Kong also does not offer incentives for SDOs to participate in government procurement, and the approval processes are relatively difficult and among the least transparent in the region. This is compounded by barriers they face in the form of access to and availability of information on procurement opportunities.
What measures and policies should be in place to improve Hong Kong’s social sector?
Regular consultations with SDOs. Governments across Asia are becoming increasingly aware of the need to engage the social sector in policy consultations. But these consultations are largely informal and infrequent, with more than half of SDOs in Hong Kong – the highest in Asia – reporting not being involved in any policy consultations, and only 7% of SDOs report that they are regularly involved. These consultations need to be more than just a checkbox approach, and the process must be made more inclusive.
Regulations that enshrine accountability and transparency. Regulations that enshrine accountability and transparency need to be enacted and enforced to help build trust in the social sector.
Government procurement from the social sector can encourage its growth and legitimisation. However, procurement remains largely underutilise in Hong Kong with only 17% of SDOs having government contracts, compared with the Asian average of 30%.
Simplified set up process. Lastly, the ability to set up an SDO easily and efficiently, as well as facilitating smooth, unrestricted flow of funds can go a long way towards creating an enabling environment for the social sector in Hong Kong.
How can Asian markets better support social delivery organisations?
SDOs providing humanitarian, welfare and social services need the support and commitment of donors now more than ever. Funding is the lifeblood of the social sector – it enables SDOs to function, offer services and deliver on their vision.
At a time when foreign funding is on the decline across the region, the importance of private social investment and “Asia for Asia” philanthropy cannot be understated. In order to meet the United Nations Sustainable Development Goals (SDGs) by 2030, economies in Asia will need to invest US$1.5 trillion annually. However, Asia is currently not on track to meet any of the SDGs as a region. An estimated US$701 billion per year can be unleashed if Asia – home to 26% of the global rich – were to match the United States in terms of philanthropic spend. This is about 14 times the net foreign aid flowing to Asia and roughly 28% of the expected costs to fulfil the SDGs by 2030.
“Asia for Asia” philanthropy would be able to help fill the funding gap given the Asia-Pacific region is poised to host almost a quarter of all ultra-high-net-worth individuals (UHNWIs) by 2025, a 17% increase compared to a decade ago. This presents a unique opportunity to leverage a considerable pool of wealth to tackle systemic challenges through poverty alleviation and environmental protection and by promoting societal resilience.
CAPS is committed to assisting the region to realise its potential as a global leader in social innovation. We present DGI2022 as a unique and systematic body of evidence with the aim of unleashing the potential of private social investment in Asia.
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