In a conversation hosted by Rajesh Chandy, on behalf of the Wheeler Institute for Business and Development, and moderated by Kimberly Brown, Head of Mobile for Humanitarian Innovation at GSMA, our panelists discussed the role of business in responding to the unique social and economic challenges created by COVID-19, what works in partnerships between public and private institutions (and what does not) and the lessons learned from the COVID-19 response in India. Our panelists for this seminar were Manish Sabharwal, co-founder and Chairman of TeamLease Services; Vikram Jain, Managing Director of FSG; and John Fairhurst, Head of Private Sector Engagement at The Global Fund.
Although the private sector is a fundamental pillar of response to the pandemic, it cannot – and should not – substitute the state
The question of the role of business in responding to social and economic challenges created by COVID-19 is a challenging one, but especially so in India. Sabharwal spoke of the three deficits: the government has an execution deficit, the private sector has a trust deficit and non-profit have scale deficit. Following Independence, the role of the private sector shrunk, and the public leaned heavily on government. The onset of the pandemic highlighted the binary between public and private actors and amplified many pre-existing conditions present in India, such as inequalities in urbanization, industrialization and education. Sabharwal states that in his role in the private sector, the crisis forced businesses to ask what they can do for their communities; their customers, employees and supply chains – but the expectation that the private sector could substitute for the state more widely is mistaken. The crucial lesson from the pandemic is that the state should do less, so that it can invest more in central areas where the private sector cannot act. Where challenges of COVID-19 demanded pure execution, the private sector stepped up in the areas it excelled in – such as taking the lead in logistics and manufacturing of PPE and vaccinations – and other areas, such as e-commerce and e-learning. Sabharwal cautions placing unrealistic expectations on the private sector, emphasizing the importance of public institutions in being key decision makers to shape responses to public health crises. Jain supported this, adding that over the past ~20 years, business have widened their understanding of value creation to include aspects of social responsibility, which becomes evident when we see businesses leveraging their existing infrastructure to contribute to the public good during the pandemic. However, Fairhurst urged listeners to more critically consider what the role of the private sector should be, particularly in health, where the private sector is already a fundamental pillar of pharmaceutical design and production, tool production and health delivery services. He points to the fact that in India, 75% of the first contact for tuberculosis (TB) treatment is in the private sector. Because these business were established pre-COVID to both diagnose and respond to critically important health issues like HIV, malaria and TB, it follows that they could then also play this role in addressing the COVID-19 health crisis. Fairhurst also raises the point that to encourage private sector involvement, the public sector needs to provide the regulatory and policy frameworks to do so; one without the other is suboptimal. Although we have seen huge progress in innovation and production to outlay testing and vaccinations, it is interesting to consider where we are not seeing gaps filled by the private sector. One example Fairhurst gives is that of machine learning and data analytics – where this has been utilized in developed countries to curb the spread of COVID-19, how can the private sector assist in providing more equitable access to that technology in lower-income countries?
Recognizing the different roles and distinct strengths of each of the public and private sectors is critical to building effective partnerships
The private sector offers efficiency, adaptability and responsiveness beyond what the public sector can offer – to the consumers that can afford to pay. The private sector works well in addressing specific, finite goals in a defined time horizon; the public sector is better equipped to balance multiple goals between competing interests over a longer time horizon. There is a complex balance between private sector execution and the government’s role in designing equitable outcomes, and in the ways we measure success for both. For Sabharwal, who runs a listed company, quarterly reporting to shareholders is a primary obligation, and long-term planning must be balanced with requirements for short-term returns. However, if governments focus too closely on the next quarter this can lead to poor results – fiscal and monetary policy can often be poor substitutes for structural and institutional reform. We have to be careful substituting between not-for-profit, private and public – each has their own swim lanes, with divergent strengths. Sabharwal once again emphasised the unique situation in India, where there has historically been widespread distrust of the private sector until privatisation efforts over the last two decades, and hopes that COVID-19 does not set this progress back. There is also growing tension for private sector companies – in 1955, the average lifespan of a Fortune500 company was 64 years; in the last list, that lifespan had dwindled to just 15 years, so for companies raising money from public shareholders, there are inherent trade-offs between short-term financials and longer term goals (e.g. CSR, ESG). Fairhurst seconded this, reminding listeners that we need to both recognise which lane each sector sits in, as well as realise that these are not rigid. By recognising and pooling the strengths of each sector, we can reach a scale of impact that is impossible without collaboration. He used the example of the Global Fund: originally designed as a private-public partnership, formed to bring governments, public and private sector actors together and navigate the roadblocks of collaboration, Global Fund was able to negotiate a unique pricing model with pharma companies to ensure access in lower-income countries. In this instance, production shifted to India where the manufacturer could take advantage of lower costs and therefore pass on lower margins and increase access, saving an estimated ~38million lives over the last 20 years. Partnerships like this one can be hugely powerful and can work to further win-win scenarios. Fairhurst also opines that a crisis like COVID-19 both accelerates innovation and polarises agendas – this experience has highlighted how we can address the next pandemic with more cohesion, and acted as a warning of what can happen if we do not maximise the combination of our most powerful players.
COVID-19 offers a unique opportunity for India to re-design policy and pave the way for the government and the private sector to work more cohesively together
The first thing to consider, particularly in India, is what we think of as the private sector. There are 63M enterprises in India, yet only 22.5K companies have paid-up capital of more than $1.5M. The SMEs therefore make up the large majority, who during the pandemic were forced to act very differently than large corporates. These SMES rely completely on their everyday customers, and in a lockdown, are not able to sustain salaries etc. The learning for India here was palpable, and the realization that GDP per capita matters far more than overall GDP in building resilience to withstand crisis. Sabharwal hopes that this accelerates change, and that India takes the opportunity post-COVID to re-redesign policies strengthening government and capital markets. Jain also highlighted the importance of differentiated responses in addressing inequalities, using examples of cross-subsidization across income classes in medicine as an example. Education in India was another example given by Jain – 55% of children go to private school in India, but without a scalable network of affordable private schools that reach lower income families, we cannot see the cross-subsidization model at play here. The government needs to identify core industries that can offer social benefit and design policy and regulatory framework here to encourage business growth and public benefit – Jain lists solar panel roofing as one such opportunity. Fairhurst lists a further three things that we learnt from business trade-offs through the pandemic: 1) lack of investment in health pre-pandemic; 2) the need to invest differently coming out of this crisis – now we have developed new tools in diagnostics and healthcare, we must invest in the delivery of these tools to lower-income economies; and 3) increasing investment in wider health delivery systems to both mitigate the risk of this pandemic and existing illnesses (e.g. TB, HIV, malaria) to livelihoods. Building resilient health and education systems is imperative to escape making tougher trade-offs down the road – such as lives vs. livelihoods. Fairhurst laments that the effects of the pandemic will be far longer-lasting for lower-income countries, who cannot increase their borrowing to the same levels as developed countries nations to alleviate strain on livelihoods.
By privatizing poor-performing public companies, the Indian Government can free up capital to be allocated more meaningfully elsewhere, and bring efficiencies from the private sector into spun-off entities – hopefully boosting growth. However, the funds the government receives from selling off assets is not nearly as important as the strategy signal it sends – investing in less sectors (like airlines and hotels), so that the government can utilize more public spend in the more important areas (like education and health). The government also needs to recognize where systems are failing and efforts need to increase e.g. Sabharwal suggests that having 55% of children in private education is a sign that the public offering is weak, stating that in countries with strong public education systems, that number is much lower – for example, it is just 5% in Japan. Although the government confiscated 25% of private school capacity two years ago, little has been announced to date on educational reform in this instance.
The private sector can offer an effective check and balance on public institutions, but we cannot over-extend this mandate
The private sector offers an incredibly powerful voice to shape public policy, and has the ability to act as a “hearing aid” – assisting governments in assessing issues and executing policy – but should not be expected to hold governments to account. Sabharwal warns of the complexity of public involvement for private entities – politicians can be vengeful, and ultimately regulate capital markets and private companies; moreover, private companies will always have their own allegiance to shareholders above wider public policy considerations. Fairhurst believes that the private sector should go further, citing their size as a powerful tool in advocating for fair and equitable public policy. He states that civil society, government and the private sector together form a virtuous circle that can move in the right direction. All panelists acknowledged the importance of policy in creating an environment conducive to allow businesses to make more contribution to social impact – where we can allow businesses to grow, we generate tax revenue for governments and keep capital markets competitive, meaning we ultimately have more resources to deploy in creating better social outcomes.
Few challenges have loomed as large as the COVID-19 pandemic, and particularly its effects in India. Both the private and public sector have mobilized to addresses the social and economic challenges of the pandemic; with some lamenting that neither did ‘enough’. Although some of the complexities of working across the public-private divide were highlighted during the pandemic, the rewards and opportunities of collaboration are greater now than ever, offering India a unique policy window to re-define the role of each sector in recovery efforts and better align for future crisis management.
Victoria Henderson (MBA 2021) has three years’ experience in management consulting at Bain & Company, and a background in Law and Politics. She is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.
- Manish Sabharwal is co-founder and chairman of TeamLease Services. He is currently a Member of the Central Advisory Board on Education in the Ministry of Human Resources and Member of Advisory Board of Comptroller and Auditor General of India. Manish also served as a former Independent Director on the Board of the Reserve Bank of India. Prior to TeamLease, he co-founded IndiaLife Hewitt and ICap India.
- Vikram Jain is a Managing Director at FSG based in Mumbai. He is passionate about scaling nascent industries that benefit the lives of urban families with low-income. Vikram leverages his 25 years of experience across operations, strategy and technology consulting, and global development to scale industries. Prior to FSG, Vikram worked with Monitor Inclusive Markets (MIM) as the lead of the low-income housing practice. He also worked with McKinsey & Company, Deloitte Consulting and US Interactive.
- John Fairhurst is the Head of Private Sector Engagement at The Global Fund. He leads work to engage the private sector in supporting the Global Funds mission to eliminate HIV, Tuberculosis and Malaria. This includes innovative finance models, technology and the contribution of other capabilities and assets, as well as philanthropy. Prior to this John was an Executive Director at UBS Optimus and the COO at the Global Alliance for Improved Nutrition.
- Kimberly Brown is Head of Mobile for Humanitarian Innovation at GSMA. Previously, she was the Head of Humanitarian Policy at the British Red Cross, where she led the department responsible for policy, advocacy, and research on international humanitarian issues. In July 2020, Kimberly completed an Executive MBA at London Business School.