Moving SE Asia from an emerging economy to a modern economy requires business to be plugged into the policy environment of the region, Merck Co Inc’s regional public policy chief Charles Butcher tells PublicAffairsAsia
How do you map out the stakeholder landscape and its relationship with business objectives?
The key is to start wide and narrow in. The reality of limited resources means that there is a tendency to go with the stakeholders you know and the ones directly involved with the issues you are involved with at the time. I think that it’s worth understanding the broadest number and the issues that matter to them and then identify the issues that relate to your business.
The second thing is to learn about the commercial objectives of your business and these things vary pretty significantly across Asia – South East Asia, North Asia, India and Australia and the way relationships vary. Stakeholder engagement is not truly sustainable unless there is proper buy-in from your commercial team. Time is important here in making sure everything you do is completely linked to the business and is sustainable in the long term.
The third thing is longevity. The more time I’ve spent in roles like these the more important I think it is a feature. In emerging markets the criteria and timelines for policy-making are more fluid than they might be in more developed markets. You need to be able to develop an ability to make judgments based on time and exposure to enable you to navigate these efficiently.
When it comes to managing relationships it’s frequently said that MNCs in emerging markets are not as proactive as they might be more established markets, particularly in relation to government. How do you balance pro-activity from reactivity?
There are two schools of thought depending on issue and need and this requires calibrating. Governments in Asia are central to your market regardless of whether you are in a highly regulated business or not. This has a serious effect on the sort of PA strategy you might use. There is less nervousness now about engaging in the policy environment as more MNCs become familiar with the emerging markets. Markets such as India and China are showing a rising degree of business understanding.
The job of the PA professional is to bridge the comfort zone and do so in such a way that stakeholder engagement should be more scientific rather than gut reaction. In the past, policy and PA work tended to be based more on gut feeling and intuition. Now there is plenty of science to identify what your stakeholders want and need. The evidence-based approach is the way forward, bringing together what you can read and get through formal channels,
together with what you can glean from your professional networks of contacts and the insights they can bring. This should all be integrated into the business plan to ensure commercial strategy reflects the environment.
One thing which does get overlooked is finding someone senior enough in the business who has an interest in policy work or the right personality to
engage. In emerging markets finding the right people, who are comfortable with the fluidity of the environment, can be difficult. This is important for developing relations independently of a crisis and issues management approach.
Do you think the public affairs process is more difficult in less transparent and less democratic political systems?
Many countries that have highly developed democracies are not very transparent when it comes to the decision making process. A lot of governments
in Asia, for example, prefer to maintain a lack of transparency in healthcare policy-making because it helps relieve political pressure to expand care. The global financial crisis for example has impacted on healthcare where cost containment has put pressure on transparency. Alternatively many one party systems have stability and predictability, which is good for business planning and enables decisions to be taken compared to systems offering constant change.
When it comes to operating in highly regulated environment, such as pharma, is it easier to develop a ‘tick box’ approach to
public affairs?
The reality of emerging markets is that even in highly regulated industries the predictability isn’t necessarily there. In many Asian systems not only is government central but there is a degree of centralisation within government. In those governments the reality of who takes the decision may be just one or two people.
Informal and formal networks, combined with published sources of information, should be used as a strong basis for PA activity. But this is not always an easy fit with multinationals who have built a business model around a western system. So the job of the PA professional is to bridge the two. The understanding of commercial objectives is also critical in these situations.
How much time is spent internally managing expectations regarding the delivery of your PA objectives?
Managing expectations internally in emerging markets is absolutely critical because the external environment is, by its nature, moving constantly. A key thing for me is that you have to be very well organized. Due to reporting lines across a variety of levels and internal functions there may be a huge variation in understanding of the issues. The challenge is get everyone to a minimum level of understanding so internal alignment doesn’t become an issue.
If you are trying to do some innovative stakeholder engagement, particularly around sensitive issue like healthcare, there are going to be challenging
times. The importance of internal alignment is therefore vitally important. In emerging markets the challenge involves coping with the pace of change, the slower policy-making process, and the need to manage this tension.
How much control should HQ-based practitioners and managers have over the regional messaging process?
Ultimately the issue of the control of messaging and engagement comes down to how to use regional staff and in-country personnel. Invest time in getting to know your colleagues extremely well. I am lucky because I work with a really collegiate group which enables us to maintain consistency in a diverse group of markets. Obviously, however, a degree of central control is required if and when you are faced with a set of issues to be managed.
When you look at the countries you have responsibility for is it easier to operate in more established markets?
It’s increasing difficult to make a distinction about the level of difficulty in doing public affairs in different markets. Take Korea, for example, which is an established healthcare market, but doing PA there is currently very challenging.
I have had experience in Cambodia and Laos, where dealing with public health officials has been quite easy. Not that it was always possible to get what you wanted but they proved to be accessible and clear in their objectives and clear about what they wanted to know from you.
It comes back to longevity – when you have been watching issues over a couple of electoral or business cycles you develop judgment over a period of time regarding the stakeholders that you wish to engage with.
How important is it to be seen to be local?
It is important for the PA professional to bring an external perspective and to know where a given country is at in a given point of time. Take, for example, many South East Asian nations which now have a policy to develop local supplies of their medicines. That is a legitimate policy issue which the multinational community is going to have to work with rather than against. This is where it’s important to be local in approach and outlook.
How important are trade bodies in representing your interests?
In the pharmaceutical industry the industry associations are the primary platform for representation in every country. Some 75 per cent to 80 per cent of the challenges faced by companies are industry related challenges. I think this is being better understood in emerging markets and the associations are realising that understanding individual countries is important too.
More and more industry associations are producing policy options that aren’t going to cause governments problems with their electorates. Companies can’t influence this area on their own but are more effective using these groups. These bodies are also better at generating good ideas to take to government.
Are you in a better position to influence the regulatory environment in emerging markets?
I think the realistic approach is incremental. In healthcare for example it’s obvious that no country has got it absolutely right. Many emerging markets are very aware of other countries experiences and ready to avoid pitfalls and learn from them. Many MNCs need to recognise the fast pace of change in these markets, systems that are still developing and that progress towards best practice is going to take time. Many MNCs that aim to have a long term position in these markets recognise these factors.
There is a growing mentality that we are all in this together in moving from an emerging economy to modern economy and that it’s better to work collaboratively than to push parts of the system too far. The better plugged in your business is to the policy environment within which you operate the better it will be for your business.
Charles Butcher is Director of Public Policy (Asia Pacific) at Merck & Co Inc
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