Sunday, August 13, 2017

Sub-optimization mindset behind PH underdevelopment

“Sub-optimization is a situation where a processprocedure, or system yields less than the best possible outcome or output, caused by a lack of best possible coordination between different components, elements, parts, etc.” [businessdictionary.com]

This is not the first time the blog raised sub-optimization – aka “pwede na ‘yan” – as a barrier to PH growth and development. And it boils down to our inability to demonstrate foresight – and why community and the common good is alien to us.

“But as the old Bob Dylan song goes, the times are a-changin’. There are at least four trends [(a) unemployment rate; (b) deployment of OFWs has slowed down; (c) quality of domestic jobs improving; (d) the economy is growing on a broader base, both on the supply and demand sides] in the economic data that suggest growth is getting more inclusive, and benefiting a wider range of our people, including the poor … These are indeed clear signs of more inclusive growth. We must have been doing something right in the past several years. Whatever it was, we need to keep doing more of it.” [Inclusive growth is finally happening, Cielito F. Habito, NO FREE LUNCH, Philippine Daily Inquirer, 8th Aug 2017]

In other words, given OFW remittances and the BPO industry bring roughly $50-B or 17% of the economy, we must be doing something right. And we need to keep doing more of it.

A consumption economy (that accounts for 73% of GDP) like ours generates what economists call the multiplier effect of investment – though not to the extent an investment economy does – and at the end of the day, it explains why the economy has been growing in the 6%-7% range; as well as our lead in industrial production growth of 8.4%, against Vietnam’s 83% of PH, Malaysia – 50%, Indonesia – 42%, Thailand – 37%.

Oishi, Jack ‘n Jill and Jollibee (foods) and Islander (flip-flops) are popular, successful and growing Philippine brands and businesses, to name just a few, and they benefit from our consumption economy – and are among those behind the uptick in investment. Although Islander can learn from the others by thinking regional, if not global, and compete against global brands like Havaianas.

As the blog has argued, we must learn to look outward and forward, not keep to our backward, parochial and insular instincts. Take investment in fixed capital which represents the supply side of the economy, how do we compare against our neighbors? Ours stand at 22.3% of GDP while Thailand is 108% greater than PH; Vietnam – 115%; Malaysia – 117%; Indonesia – 148%.

That is what the blog means when it talks about our need to rapidly erect an economic platform that is world-class – i.e., to overcome decades of deficits in infrastructure development, industrialization and innovation and competitiveness.

Figure out if indeed ours is an inclusive economy given our income per person (GDP at PPP) which stands at $7,700 when Indonesia is 152% better than PH; Thailand – 218%; Malaysia – 353%. And we cannot celebrate that Vietnam is behind us at 83%. Vietnam beats us in FDI (183% more) and exports (443% greater) and the compounding effect will leave us in the dust.

Those are staggering numbers that we must overcome and they explain why it will take a generation even at 7% GDP growth for PH to truly be an inclusive economy. And that is assuming we get our act together to keep that pace of growth. And the blog has pointed out the obvious: the generation of the writer is toast!

Consider: “The flow of Japanese investments has started to slow down in the Philippines, blamed partly on certain policy changes such as the government’s pivot to China and Russia.

“Preliminary data from the Japan External Trade Organization (Jetro) showed Japan’s outward foreign direct investments (FDI) in the Philippines plunged 56.6 percent in the first five months of the year to $561 million.

“On the other hand, Japan’s FDI in other Southeast Asian countries like Vietnam, Thailand and Singapore increased by double digits in the same period.” [Japan investments plunge 57%, Richmond Mercurio, The Philippine Star, 8th Aug 2017]

In other words, for a guy playing catch up, we truly know how to mess things up. Consider too: “Is MRT 3 hopeless (?),” Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 11th Aug 2017.

“That visit to Clark and the news that BCDA’s Vince Dizon is all set to bid out construction of the airport very soon is good news. Vince PMed me to say that the ‘Terms of Reference’ or ‘TOR’ will be released this week. Interest has been expressed by 12 parties, all foreign and with experience in building airports. 

“More specifically, the pre-bid conference is set for Aug 22; opening of bids on Oct. 28 (two months to prepare proposals); award to be made on Nov. 28; groundbreaking on Dec. 19 and first quarter 2020 for turnover of the facility. Since it will be on a turn-key basis, there will be no money problems to delay execution.

“Back in Manila, it is back to reality. Is the MRT-3 hopeless?  A recent column of my colleague, Jarius Bondoc, seems to indicate it is. Our last hope, the new Chinese-made trains, is a no-go.

‘The 48 coaches from China bought by former DOTC Sec Jun Abaya at the cost of P3.8-billion in 2013 is a total waste. Jarius reported that the coaches are 3,300 tons too heavy. Specifications were for a weight of 46,300 tons for the 48 coaches. What the Chinese manufacturer delivered totaled 49,600 tons.

‘The new units cannot be driven up the hundred-million-peso jack for periodic inspection and upkeep of the bogey frames, wheels, and brakes. There is no space at the depot to install a new jack just for the faulty trains. Mechanics have no elbowroom to repair or replace crucial under-chassis parts.

“I suppose this means they are back to square one.”

“Here's why your attitude is more important than your intelligence,” Dr. Travis Bradberry, World Economic Forum, Industry Agenda, 9th Aug 2017; Dr. Travis Bradberry is Coauthor of EMOTIONAL INTELLIGENCE 2.

“When it comes to success, it’s easy to think that people blessed with brains are inevitably going to leave the rest of us in the dust. But new research from Stanford University will change your mind (and your attitude).

“Psychologist Carol Dweck has spent her entire career studying attitude and performance, and her latest study shows that your attitude is a better predictor of your success than your IQ. Dweck found that people’s core attitudes fall into one of two categories: a fixed mindset or a growth mindset.

“With a fixed mindset, you believe you are who you are and you cannot change. This creates problems when you’re challenged because anything that appears to be more than you can handle is bound to make you feel hopeless and overwhelmed.

“People with a growth mindset believe that they can improve with effort. They outperform those with a fixed mindset, even when they have a lower IQ, because they embrace challenges, treating them as opportunities to learn something new.”

This is not the first time the blog spoke to the growth mindset. In our case, do we in fact value being static as opposed to dynamic? We appear to be in the Benedict camp, does it mean we don’t buy the theology of Francis?

“What Is the False Self (?),” Richard Rohr’s Daily Mediation, 7th Aug 2017. “Your egoic false self is who you think you are, but your thinking does not make it true. Your false self is a social and mental construct to get you started on your life journey … It is largely defined in distinction from others, precisely as your separate and unique self. It is probably necessary to get started, but it becomes problematic when you stop there and spend the rest of your life promoting and protecting it.

“Jesus would call your false self your ‘wineskin,’ which he points out is only helpful insofar as it can contain some good and new wine. He says that ‘old wineskins’ cannot hold any new wine; in fact, ‘they burst and both the skins and the wine are lost’ (Luke 5:37-38). This is a quite telling and wise metaphor, revealing Jesus’ bias toward growth and change. ‘The old wine is good enough’ (Luke 5:39), says the man or woman set in their ways.

“The false self, which we might also call the ‘small self,’ is merely your launching pad: your appearance, your education, your job, your money, your success, and so on. These are the trappings of ego that help you get through an ordinary day.

“Please understand that your false self is not bad or inherently deceitful. Your false self is actually quite good and necessary as far as it goes. It just does not go far enough, and it often poses and thus substitutes for the real thing.

“The false self is bogus more than bad; it pretends to be more than it is … If people keep growing, their various false selves usually die in exposure to greater light. That is, if they ever let greater light get in; many do not.”

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

Sunday, August 6, 2017

What leadership is and isn’t

‘I think the president has to keep in mind a couple of things,’ Sen. Richard C. Shelby (R-Ala.) said Thursday. ‘Jeff Sessions, like all Cabinet members, works for the United States of America. They don’t work for the president; they work for the people … The president’s a smart man, and he ought to know that.’ [GOP lawmakers openly defy president as frustration mounts, Mike DeBonis, The Washington Post, 27th Jul 2017]

Can we Filipinos square the circle? And here is how another US senator demonstrated what leadership is and isn’t. “Americans glimpsed a rather different idea of public service in the wee hours of Friday when Senator John McCain turned his right thumb down and blocked his party’s attempt at policy making by partisan riot, its farcical scramble to attack the health care system with no vision for how to remake it.

‘Stop listening to the bombastic loudmouths on the radio and television and the internet,’ he implored the Senate. ‘To hell with them. They don’t want anything done for the public good. Our incapacity is their livelihood.’

“Let’s hope that Senator McCain’s words, rather than Mr. Scaramucci’s expletives, echo in Americans’ ears in the days to come. Perhaps the new chief of staff, John Kelly, will change things [like he fired Scaramucci], but to date the president has too many aides who lack the competence to govern the country or the character to set an example for it.

“Over and over again, Mr. Trump has shown himself to be a small man, and he is engaged in shrinking the presidency to fit himself. As Mr. McCain demonstrated again on Friday, the senator is built of different stuff, and on a grander scale.” [Mr. McCain and The Mooch, Editorial, The New York Times, 29th Jul 2017]

And it’s not just one or two senators that have [sturdy] backbones … “They passed legislation to stop him from lifting sanctions on Russia. They recoiled at his snap decision to ban transgender Americans from the military. And they warned him in no uncertain terms not to fire the attorney general or the special counsel investigating the president and his aides.

“Republican lawmakers have openly defied President Trump in meaningful ways this week amid growing frustration on Capitol Hill with his surprise tweets, erratic behavior and willingness to trample on governing norms. But at the same time, they’ve worked to advance legislation they want him to sign.

“In the latest signs of a backlash, Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Judiciary Committee, said Wednesday he would not hold hearings on a replacement if Trump dismissed Attorney General Jeff Sessions, and Sen. Lindsey O. Graham (R-S.C.) said Thursday he would pursue legislation that would prevent Trump from summarily firing special counsel Robert S. Mueller III.

‘Some of the suggestions that the president is making go way beyond what’s acceptable in a rule-of-law nation,’ Graham said. ‘This is not draining the swamp. What he’s interjecting is turning democracy upside down.’

“Some of the defiance came from already outspoken Trump critics such as Graham and Sen. Ben Sasse (R-Neb.), who rebuked the president from the Senate floor Thursday.

‘If you’re thinking of making a recess appointment to push out the attorney general, forget about it,’ Sasse said. ‘The presidency isn’t a bull, and this country isn’t a china shop.’” [DeBonis, op. cit.]

And they’re not talking about killings as in EJKs – which in our case we accept as a given. And we claim we don’t live in trees because we’re wiser than Solomon – to set a legislator accused of plunder free but let poor Juan de la Cruz and his family suffer via EJK? Indeed, we hold the keys to heaven? Or we’re stuck in an ideology – the Damaso theology – and yet to be introduced to the Franciscan theology – a God of love and not of fear – that Francis has embraced. Because like all of creation, the Church isn’t static but dynamic?

Must we – the Filipino people – figure out what the rule of law is and isn’t … and what leadership is and isn’t? Sadly, our instincts of hierarchy and subservience firmly hold us like the claws of a vise. And why the blog has teed up the risk we face – if we’re not a disaster waiting to happen, yet – and that is, there is a thin line between a downward spiral and a death spiral, if we chose to be static instead of dynamic.

Why have nations in the region overtaken us growth and development-wise? And as insane as Einstein calls it, we go through our Pinoy ways over and over again – and yet expect PH to magically turn into an inclusive economy, unmindful of the vicious circle upon us?

Because we now have a president that is the knight in shining armor?

“The recent State of the Nation Address of President Duterte, where he declared he will pursue his war against drugs in an unrelenting manner, confirms that we have the closest thing to a one-issue presidency.

“Mr. Duterte himself had on many occasions pointed out that poverty fuels the drug trade while terrorism is partly funded by the drug lords.

“On this basis, it would appear that the war on poverty should be our primordial concern since it underpins the two other ongoing wars. Nonetheless, the war on drugs has defined our national policy.

In foreign relations, we have classified as unfriendly any leader or country criticizing Mr. Duterte’s bloody war on drugs, among them former US President Barrack Obama, former UN secretary general Ban Ki-moon, Pope Francis and lately, the European Union.

“On the other hand, we have claimed as friends leaders like Xi Jinping and Vladimir Putin who had not endorsed Mr. Duterte’s war on drugs but simply remained silent on the issue.” [Single-issue presidency, Hermenegildo C. CruzPhilippine Daily Inquirer, 31st Jul 2017]

If repeatedly Trump has shown himself as a small man, what about Du30? “Duterte is in over his head. His conceit is that his overrated stint in Davao City provides him the blueprint for dealing with the complexities of the country’s historical ills. He misrepresents authoritarianism for political will and resort to mass murder and bullying tactics for decisive leadership.” [Unmasking Duterte, Carol Pagaduan-Araullo, Streetwise, BusinessWorld, 31st Jul 2017]

It is not only in politics where leadership matters. Do we wonder why we don’t represent innovation and competitiveness? Leader-dependency and deference kills inquisitiveness and imagination and creativity. And why foresight isn’t in our bag of tricks.

Test every “kuro-kuro” we come across and chances are they are a reaction to a stimulus aka reactive as opposed to proactive or, at best, a product of incremental thinking. [Why do we think the Chinoys today dominate PH economy?]

What we sorely need is out-of-box thinking. Instead of shrinking our playing field, we must seek to expand it. But we are handicapped by parochialism and insularity. We take it for granted that our two major income streams – OFW remittances and the BPO industry – can make us the next Asian Tiger so long as we pursue the conventions of monetary and fiscal policies.

Of course, we saw the opportunity presented by tourism. But to transform PH from an underdeveloped to a developed economy demands a world-class platform. Yet we don’t have to reinvent the wheel. And it is not rocket science to learn from the Asian Tigers. But it takes a commitment to community and the common good if the leadership and the people are to figure out and traverse the journey from poverty to prosperity. 

Even expertise can’t be absolute – and stand in isolation – and why the blog has raised the collapse of Long-Term Capital Management (a hedge fund) which was led by two Nobel Prize-winning economists; while endorsing Design Thinking, developed by Stanford University, which is cross-discipline and team-based. And so, the blog also brought up the pioneering efforts of Fr. Bulatao in group dynamics, Filipino-style.

For example, the right leadership recognizes that innovation and product development does not reside in R&D alone. And it explains the following statement referenced above: “Over and over again, Mr. Trump has shown himself to be a small man, and he is engaged in shrinking the presidency to fit himself.”

True leadership delivers synergy and outsized outcomes by leveraging the dynamism of the team. And why in the case of Apple products, Steve Jobs is not the only name that comes with the patents they earned.

While Du30 is brave … is this … and is that …? Because it is Juan de la Cruz that chose to be a small man?

What is leadership? It is not the opposite of leader-dependency and subservience – because the latter feeds and breeds the monster we know as impunity!

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

Tuesday, August 1, 2017

AmBisyon Natin 2040

The Neda must be applauded and encouraged for coming out with AmBisyon Natin 2040: A long-term vision for the Philippines. What about media, should media be allocating time and space to keep AmBisyon Natin front and center of Juan de la Cruz? Or how do we become more sensitive to the imperative of “community and the common good”? Think about it. If we acknowledge that our institutions have failed us, it is the starting point.

The challenge then is for Neda to engage us beyond the roadshow they did to showcase the Philippine Development Plan (PDP) for 2017-2022. If you have bought a book from Amazon, you will be in their engagement crosshairs. It can be annoying but this writer is a sucker and he’s not alone otherwise Jeff Bezos would not be the richest man in the world.

Full disclosure: The writer – given his MNC background where bridging planning and execution is religion, and it’s the mantra he has preached to his Eastern European friends – finds the Neda document loaded with platitudes. But that should not discourage us because visions are not as concrete as the war on drugs, for example. And concrete is what gets people’s attention as in EJK despite putting our Christianity to a test.

Neda can learn from one of the great visionaries of all time – a genius in the league of Einstein and Beethoven. “20 Years Ago, Steve Jobs Demonstrated the Perfect Way to Respond to an Insult,” Justin Bariso, inc.com, 26th Jul 2017. “In 1997, Steve Jobs had just returned to Apple, the company he had been ousted from over a decade before. He was answering questions for developers at Apple’s Worldwide Developers Conference when one audience member took a shot at him: ‘Mr. Jobs, you’re a bright and influential man,’ he begins.

‘Here it comes,’ responds Jobs, as both he and the audience chuckle. Then, the famous insult:

‘It’s sad and clear that on several counts you’ve discussed, you don’t know what you’re talking about. I would like, for example, for you to express in clear terms how, say, Java and any of its incarnations addresses the ideas embodied in OpenDoc. And when you’re finished with that, perhaps you can tell us what you personally have been doing for the last seven years.’ Ouch.

“But Jobs’s response is a perfect demonstration of what to do in this situation. He takes a pause. He takes a pause, sits in silence ... And thinks. ‘You know,’ he begins his reply. ‘You can please some of the people some of the time, but ...’ Another pause.

‘One of the hardest things when you’re trying to effect change is that--people like this gentleman--are right! ...In some areas,’ explains Jobs.

“But becoming familiar with every feature of every app is not the CEO’s job, as he goes on to explain. He helps everyone see the big picture. Jobs goes on to outline his role at Apple: ‘It’s not to know the ins and outs of every piece of software. Rather, it’s to see the big picture, to reiterate the vision, and to keep everyone on course:

‘The hardest thing is: How does that fit into a cohesive, larger vision, that’s going to allow you to sell eight billion dollars, 10 billion dollars of product a year? And one of the things I’ve always found is that you’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it.’

‘And I’ve made this mistake probably more than anybody else in this room. And I’ve got the scar tissue to prove it. And I know that it’s the case … There are a whole lot of people working super, super hard right now at Apple,’ Jobs exclaims. He names a few examples, before going on to credit the whole team, literally ‘hundreds of people.’

‘They're doing their best,’ says Jobs. ‘Some mistakes will be made, by the way. Some mistakes will be made along the way. And that’s good. Because at least some decisions are being made along the way. And we’ll find the mistakes, and we’ll fix them,’ Jobs says to applause.

“He then comes full circle to the original questioner: ‘Mistakes will be made ... some people will not know what they’re talking about, but I think it is so much better than where things were not very long ago. And I think we're going to get there.’”

There is a lot to digest from the Steve Jobs story. Neda with the help of media can direct us to the big picture, constantly reiterate the vision and keep all of us on course – fitting the pieces into a cohesive, larger vision.

As AmBisyon puts it, “Where do we want to be?” In the case of Apple, with products to sell, Jobs explains, “you’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it.”

“AmBisyon Natin 2040 is a picture of the future, a set of life goals and goals for the country. It is different from a plan, which defines the strategies to achieve the goals. It is like a destination that answers the question “Where do we want to be?”. A plan describes the way to get to the destination; AmBisyon Natin 2040 is the vision that guides the future and is the anchor of the country’s plans.”

And clearly to bridge planning and execution equals lots and lots of hard work ... as well as making mistakes and fixing them. And why there is constant decision-making challenges. And that is a handicap we must recognize as a nation. Beyond the lack of foresight, do we suffer from the inability to learn from our mistakes?

We are now into Martial Law II or ML Lite. We used to dread it ... yet now many of us applaud it? Have we learned from the past? Another example: It took decades to make NAIA 3 a reality ... and the next airport will take decades again? Where is the credibility behind Build, Build, Build ... if there is one? Is it EJK?

What about tax reform? Are we taking BOC, as an example, for granted? Tax reform cannot take a bureau tasked with tax assessment and collection for granted. If we truly understand global competition, there are imperatives we must step up to. There is no tentativeness in global competition. We either win or we lose.

It applies as well to our inability to attract foreign direct investment (FDI.) Yet we want to count the chickens before they hatch? Comparing FDIs – and let’s forget Singapore for the moment being a league all its own – what is the real picture? Relative newcomer (to the free market) Vietnam has amassed 183% more FDI than PH, Malaysia – 246%, Thailand – 304%, and Indonesia – 466%.

And why “investment” is central to the blog and the requisite platform of an inclusive economy – e.g., infrastructure development, industrialization and innovation and competitiveness. To be an inclusive economy is not about platitudes and populism. It is about reality. Which reminds the writer of Fr. George?

And, the Oxford University program, “From poverty to prosperity: Understanding economic development.” This body of knowledge is truly relevant if we are to succeed with AmBisyon.

We’ve always been tentative in the pursuit of industrialization. Wittingly or not, we wasted 6 years with the Aquino administration that kept the JFC’s 7 industry winners in the backburner. And is Du30 doing any better? As the blog pointed out in an earlier post, if we are to get industrialization going, we must learn to focus on fewer industries – to overcome “crab mentality” – and where we will get the biggest bang for the buck. We must get quick wins to give us the confidence in the quest for something truly grand – and where we have no track record to bank on. Our penchant for “kuro-kuro” is no substitute for real world experience.

“And the top PH exports are a good starting point while we inject greater market orientation and figure out consumer needs – and scale and ascend the value chain. [These are PH’s top exports that yield a trade balance surplus: (1) Electronic machinery, equipment; (2) Wood; (3) Optical, technical, medical apparatus; (4) Ships, boats; (5) Fruits, nuts; (6) Ores, slag, ash; (7) Gems, precious metals; (8) Knit or crochet clothing, accessories; (9) Leather/animal gut articles; (10) Vegetable/fruit/nut preparations]

“To establish a true north and to prioritize both demand foresight.”

Beyond learning from Steve Jobs, Neda must also figure out the “driving and restraining forces” that will either spell the success or failure of AmBisyon Natin 2040. While problems in execution are bound to crop up, being proactive and putting on the table these positive and negative forces will stand the AmBisyon enterprise in good stead.

And overcome something that has dogged us, a vicious circle, a sequence of reciprocal cause and effect in which two or more elements intensify and aggravate each other, leading inexorably to a worsening of the situation. [Google]

And what better example than our culture of impunity, a by-product of: parochialism and insularity; hierarchy and paternalism; political patronage and dynasties; and oligarchy. And unsurprisingly, foresight is not second nature to us.

More to the point, our instincts of hierarchy created the Pinoy caste system that neutered “forward-thinking” on one hand, and nurtured subservience on the other. This vicious circle must constantly be in the headlines to clear the way forward for AmBisyon.

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

Friday, July 21, 2017

Why we’re the regional laggard

Two articles can only make the writer shake his head. Because we’re supposed to be in the 21st century, several decades removed from his childhood days in Sampaloc (near the Holy Trinity Church on Calabash Road), an inner city of Manila, where as a young boy he witnessed roads being laid out in their neighborhood – and brought the demise of the “looban.”

He understood from his elders that it was a sign of the progress to come. He still remembers his first escalator ride in a movie house on Azcarraga Street and the time his father’s employer moved from Plaza Moraga to Ayala Avenue, which was essentially an open field saved for the sprinkling of buildings under construction and the gated communities surrounding them.

Every time he drives along Paseo de Roxas, he remembers how as an 11-year old he successfully steered on a straight line the VW Beetle driven by the PR Manager of his father’s company though seated away from the steering wheel, and qualified him to represent the company, with another boy, in the Philippine Soap Box Derby. (Which was not a surprise given he was experienced driving bumper cars, then popular in Burnham Park, Baguio.) The race track was a converted section of Quezon Boulevard by JUSMAG, where they erected an elevated ramp at the starting line – given the cars were gravity-propelled. Those were the good old days:  how pleasant Quezon Boulevard was and, of course, the old Makati Commercial Center.

It also introduced him to the real world. In the US, boys personally built their soapbox derby cars, as mandated by the rules. But not in his case. Bigger boys at Don Bosco San Lorenzo did it for him. Yet the photo ops, which appeared in a couple of dailies, showed him hard at work on his car.

We always had it so good and easy – living for the moment and oblivious that man is meant to look far out into the future because there is no free lunch even for succeeding generations – and decades later are paying the price?

And these are the two articles referenced above: (a) “Ang acquiring Prieto interest in Inquirer,” [Krista A. M. Montealegre, BusinessWorld, 18th Jul 2017] and (b) “Starving the small firms (and farms),” [Cielito F. HabitoPhilippine Daily Inquirer, 18th Jul 2017]

Is this Marcos Martial Law redux – that was supposed to rid us of oligarchy only to reinvent it in another form? While small firms and farms continue to starve?

In an earlier post the blog spoke to Modern Math and the concept of sets and subsets. This one can build on that. How do we solve a problem like Maria?

“There is wide scope for widening our MSMEs’ access to capital, and unless we succeed in this, we will remain the region’s bottom-dweller in having small firms become the inclusive economic growth driver they could and should be.” [Habito, op. cit.]

Capital is indeed a subset of development. But as the blog has argued, our challenge goes beyond the conventional wisdom of monetary and fiscal policies.

Coming from the private sector, the writer has a free-enterprise bias which can best be illustrated by this piece. “This Is The Shakeup Procter & Gamble Needs,” Josh Arnoldseekingalpha.com, 18th Jul 2017.

Procter & Gamble, an old, familiar pre-WW II name in the Philippines, was associated with “Tawag ng Tanghalan, emceed by the venerable Patsy and Lupito, whom the writer met as a kid through the step-father of his dad who was in show business (he went by the name of Gregorio Ticman). And as fate would have it, the writer would be at the opposite camp, competing against P&G during his MNC days … and up to the present as a consultant to his Eastern European friends.

What’s the latest with P&G? “To say that I haven't exactly been a huge fan of consumer staple giant Procter & Gamble (PG) in the past is quite the understatement. I've felt the stock was tremendously overpriced for a long time based upon a complete inability to grow or even adapt to changing markets, such as the turmoil it has experienced recently with its Gillette business, as an example, as newcomers like Harry's and Dollar Shave Club have taken share. To me, PG is a shining example of a bloated corporate iceberg unwilling to accept that there are actually competitive companies out there willing and able to take market share from it and as a result, I haven't been interested in the stock.” [Arnold, op. cit.]

What can we learn from this? “PG is a shining example of a bloated corporate iceberg unwilling to accept that there are actually competitive companies out there willing and able to take market share from it …”

Does it sound like PH when compared with our neighbors? Are we unwilling to accept that there are actually competitive countries out there? As the blog has argued, we don’t have the platform of an inclusive economy – unlike the rest of the region that they drastically reduced poverty.

We now appreciate that our failure in infrastructure development, industrialization and competitiveness cannot easily be compensated by our two major income streams, OFW remittances and the BPO industry. Nor can tourism turn PH into an economic miracle like an Asian Tiger – and Greece is the example to avoid.

And what about our inability to support MSMEs via access to capital? We have a couple of handicaps that unless we harness into the bigger set of development – i.e., beyond the subsets of capital and alternative financial instruments – we shall be in an untenable position against our neighbors.

MSMEs thrive and flourish when a nation is industrialized like Japan and South Korea have demonstrated, and where MSMEs play the role of auxiliary or support industries. And which is the real world’s translation of the multiplier effect of investment economists talk about; and cars and consumer electronics products and their support industries are good examples which these Asian countries can be proud of.

An industrialized nation is more competitive than one that is not – like PH where we lag in infrastructure development, industry development and innovation and competitiveness.

To illustrate, our economy is consumption and domestic driven which is reflective of our inability to compete in the global arena. More to the point, the exports of our neighbors are so staggering when compared to ours: Indonesia are 358% more, Malaysia – 438%, Vietnam – 443%, and Thailand – 497%.

And precisely because of our inability to compete in a free enterprise system, banks will not be gung-ho to support our MSMEs. On the other hand, if our MSMEs are globally competitive, even foreign banks will come knocking on our door. It is again the laws of physics, i.e., water seeks its own level.

And why the blog often talks about the writer’s Eastern European friends, with their principal banker coming from the West but had to aggressively compete against local banks – to win their business.

Which comes first, the chicken or the egg? We must first, as the blog has argued, overcome our parochial and insular instincts as well as our values of hierarchy and paternalism, political patronage and dynasties as well as oligarchy. Because they are the subsets of the vicious circle that we know as culture of impunity.

Not surprisingly, we are starving ourselves of investment – which in the case of Singapore equated to over a trillion US dollars in FDI – technology and innovation as well as people, product and market development.

But how can small farms, for example, even have a chance in a free enterprise system that is highly globalized and competitive?

“Economic development depends upon exploiting scale and specialization, but poor societies start with neither. How can government policies promote or inhibit the exploitation of scale and specialization?”

That is lifted from the course “From Poverty to Prosperity: Understanding Economic Development” offered by Oxford University. In other words, we must be able to respond to the question: How can government policies promote or inhibit the exploitation of scale and specialization?

The challenge goes beyond capital formation. We cannot look back and inward to supporting small farms. We must look forward and outward and develop the foresight to exploit scale (e.g., consolidated not individually fragmented farms to attain economies of scale) and specialization. Until we learn from our mistakes and continue to assume populism is the be-all and end-all, we can kiss prosperity for Juan de la Cruz good bye. And why in previous posts the blog discussed the imperative of foresight.

The Marcos Martial Law did not turn us into an Asia Tiger. Marcos was no Lee, no Mahathir or Deng. And Marcos is the idol of Du30?

We are in a downward spiral … do we need a Proctor & Gamble-like shake up so that we don’t get into a death spiral?

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]