Tuesday, November 6, 2018

Ligaw na ligaw si Juan de la Cruz: Why?

Why are we neither here nor there? Because of our mindset and paradigm. And it will not be easy to move from a fixed mindset to a growth mindset nor to move from poverty alleviation to wealth generation.

Fifteen years ago when the writer arrived in Eastern Europe, among the first things that greeted him was the direness in their instincts. We are the poorest nation in Europe. And he introduced the concept of the GPS. That when you feel lost, you must imagine a GPS: Where are you; Where do you want to be; How do you get there.

Eight years later, they were recognized as one of the best and fastest growing companies in the EU. And since they have grown twice bigger. And more recently, Western global behemoths have been paying respects.

Which comes first the chicken or the egg? That is the problem of Juan de la Cruz, he is caught in a circular argument where there are no winners.

We cannot plan for energy development because Juan de la Cruz is too poor to pay anything more. We cannot pursue industrialization because we cannot afford to invest and compete.

What we need is poverty alleviation. Because only the Big Boys have the means to pursue wealth generation. It is classic fixed mindset.

And why the blog has discussed the coconut industry in recent postings. And also Denmark’s pig industry, a global leader, that became so because of their cooperatives – a way of life to them. As opposed to our crab mentality.

Worse is we can’t imagine obtaining technology from anywhere in the world. So we believe we must develop PH R&D. We must. But it is classic linear thinking. Even global enterprises with well-funded R&Ds develop a network of R&D partners of outsiders because of the imperative of innovation and global competitiveness. We Pinoys like to keep things within, i.e., parochial and insular.

Again, given our poor perceptive judgment, instead of keeping the PH coconut industry in the forefront of innovation and global competitiveness, we wanted the coconut levy fund to address poverty. We don’t understand that enormous wealth generation especially in the 21st century comes from innovation and global competitiveness.

And why the blog keeps plugging the writer’s Eastern European friends. They tap technology, especially state-of-the-art, from wherever. Recall they were a mere cottage industry 15 years ago operating in an old, dilapidated communist structure and utilizing manual labor. Today they are into robotics. Because they benchmark their product portfolios against the best in the world and are able to figure out which ones bring the biggest returns and largest margins.

It is how to create an ecosystem that is a virtuous circle. Did they have the resources in the beginning? They did not! That’s why the writer came as a volunteer (under the auspices of USAID) and never charged them NY levels consulting fees.

If that sounds too simple, it is. It’s called perceptive judgment, i.e., experience is the best teacher.

While we are still tied down to our “import-substitution” mentality that stunted PH growth and development. Even the once venerable AIM localized the admission exams – to make it affordable to poor, deserving Filipino students. So where are we in higher education? To meet global standards, we must embrace global standards!

And we can start with this laundry list: “The priority industries are: auto and auto parts, electronics and electrical, aerospace parts and MRO, agribusiness, chemicals, shipbuilding and repair, tool and die and iron and steel, agribusiness, IT-BPM, furniture, garments/textile/creative, materials, parts and components, construction, and transport and logistics.” [The DTI’s holistic approach to solve the trade deficit, RAMON M. LOPEZ, Secretary, Department of Trade and Industry, Manila Standard, 23rd Oct 2018]

Before talking roadmaps, the DTI must first do a global benchmarking – of the product portfolios of these industries. So that we can figure out where we must focus, i.e., those that give the biggest returns and largest margins. Because we must focus on generating enormous wealth. Not growing GDP by 7%. [Recall that the PH coconut industry changes roadmaps every time the PCA has a new leadership. It is called insanity.]

And then tap the requisite technologies from wherever. Building R&D from the ground up for these industries is a big joke. It explains why we’re the regional laggard. It is classic linear thinking.

If the DTI will push the envelope, it can then develop a rational investment cum incentive program for PH. The current incentive program is not geared to generating enormous wealth – via innovation and global competitiveness.

“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]
Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]
“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]

Can conglomerates come to the rescue?

That’s a reaction to Boo Chanco’s “Conglomerates to the rescue?”, DEMAND AND SUPPLY, The Philippine Star, 29th Oct 2018.

“Economist Raul Fabella, a national scientist, delivered a lecture last week that all but gave up on government’s ability to make a real difference in poverty reduction and economic inclusion.

“Fabella pointed out early in his lecture that the world has successfully halved the incidence of abject poverty since 1990. Unfortunately, the Philippines was one of the few that failed (34 percent in 1990 and 26 percent in 2015).

“Our problem, the economist pointed out, is weak institutions. Our rules are unstable and so is enforcement. Our institutions operate beyond their realm of competence. There is institutional capture by private groups for private gain... good ol’ rent-seeking.”

When rules are unstable – and enforcement as well – what should we expect? In the social science they coined a terminology, to wit: “A society is high-trust if citizens’ and organizations’ behavior towards each other is predictable. In such a society, actors follow broadly understood norms of behavior, supported by the rule of law. This is fundamental to the accumulation of social capital and economic growth.

“Citizens in a low-trust society are challenged by divergent or opaque behavioral norms. This makes behavior of others unpredictable, impairing social capital and economic activity. These societies may experience high levels of corruption and inequality.” [Brett Whysel, Lecturer, Public Economics & Decision Making at City College of New York; Quora.com]

And it also explains why we miss the forest for the trees as well as our bias against simplicity. For example, “Party-list road to hell,” Editorial, Philippine Daily Inquirer, 27th Oct 2018.

“Familiar to many is the proverb or aphorism that ‘the road to hell is paved with good intentions.’ Many people take this to mean that many ventures start out with well-intentioned purposes, but somewhere along the way from conception to execution, something goes awry and ends up in disaster—or hell.

“The party-list experience in the Philippines is fast proving this rather cynical saying true. What was originally intended as a political mechanism to give so-called ‘marginalized sectors’ a chance to participate in mainstream politics has, through the years, evolved into a hodge-podge of special interest groups, associations and quasi-political parties.

“From parties contesting seats in the House of Representatives for such groups as farmers, laborers, the disabled and women, party-list contenders now include security guards, electric cooperatives, sports personalities, savings and loans associations, and parent-teacher groups.

“Even more absurd than the extension of the title of ‘party list’ to any sort of gathering of folks and mere barkada is the choice of the top nominees.”

Yet we never learn? And why well into the 21st century we’re still into infrastructure issues when the Asian Tigers have had a leg up of at least 50 years?

We can’t keep it simple and so we assume complexity is an advantage? Does this explain why despite the efforts of JICA we never got around to addressing Metro Manila’s infrastructure shortcomings? Which brings us back to perceptive judgment. Experience is the best teacher, including, when it comes to figuring out cause and effect. And in the Philippines, given we’re the regional laggard, we need a lot of development experience before we can truly make the right call.

And the nuance is dissected by the following, the caveat being the bottom line, i.e., either way it must be understandable: “Simplicity is the Ultimate Sophistication. While Leonardo da Vinci is widely recognized as having coined this pithy phrase, in our day, Steve Jobs is known for having used this mantra to define his company’s visual appeal.

“Most of us, when we think of the sleek, sexy products that Apple has developed over the last 20 years, we recognize the wide-reaching appeal that simplicity has had on our society.

“In my design classes, students always want to say, ‘simplicity is key for all designs!’ Sure, simplicity has its place, but so does complexity. There are many times when designs ought to be complex, and sometimes have to be (maps of complex areas, like amusement parks, for example aren’t necessarily simple—but that doesn’t mean they can’t be understandable).” [“Simplicity is the ultimate sophistication,” Curtis Newbold, 16th May 2013; the visualcommunicationguy.com]

Here’s the perspective the blog has raised over the last 9 years. Defining the PH challenge around poverty is precisely why we can’t demonstrate foresight and thus miss the forest for the trees. And in recent postings it discussed the coconut industry.

And so we quote: “We cannot address the plight of the coconut farmers by simply talking poverty. Our mindset and paradigm must be to generate enormous wealth in this industry.

“And beyond coconut, we must likewise: (a) benchmark the product portfolios of what the DTI calls the priority industries; (b) figure out which products generate the biggest returns and largest margins; (c) prioritize – and not fall into crab mentality – the ones we must aggressively develop; and (d) obtain the requisite technologies from wherever especially state-of-the-art. And ... generate enormous wealth ... and create the ecosystem for sustainable growth and development.

“And that’s how we must develop roadmaps ... and after – not before – we ascertained the big picture, i.e., the outcomes and the business objectives. And for the enterprise we call The Philippines, that means focusing on efforts that will directly generate enormous wealth. It is beyond a-7% GDP growth rate per se which as we now say isn’t inclusive.”

The JFC and the DTI seem to be pointing at the same set of priority industries. Yet it appears we’re still uncertain how to push the envelope. And why the blog has raised the following barriers that we won’t appreciate being negatives. But it takes growing up to accept our shortcomings.

First of all, and it is not our monopoly, very few people truly have developed their sense of foresight. And why Steve Jobs is considered a genius. Recall that the heart of the iPod that became the precursor to the iPhone is the hard drive the size of the dollar coin. And it is Japanese technology. Ergo, the one who has the foresight wins! The Japanese did not know how to monetize their own technology.

And as we know in economics, there is such a thing as deficit financing or why we have borrowed so much. The problem is we don’t put these funds to productive and efficient wealth-generating use.

Now, let’s tee up those priority industries. If the conglomerates can take on the coconut industry, for example, then their capacity to deliver which government doesn’t have will bring us a windfall.

And we quote again from an earlier posting: “Coconut is a versatile fruit and offers a range of products that will scale the value chain. But we must benchmark the portfolio against neighbors that have grabbed the leadership from us so that we can figure out which ones give the biggest returns and largest margins and must be the focus. In other words, the coconut industry must be founded on innovation and global competitiveness. That is the big picture – the industry must generate enormous wealth that will lift all boats within the industry, especially farmers, and appreciably raise its share of exports … and PH per capita income.

“But it requires technology to develop these products. Technology in fact is demanded across the board, from farming to production as well as marketing of these products.  

“But we can acquire technology from other parts of the world and don’t have to reinvent the wheel as we like to do. As in: parochial and insular. To develop STEM (science, technology, engineering and mathematics) does not mean reinventing the wheel. How many decades have we wasted and yet are still clueless going forward because we can’t shift paradigms?”

In other words, we don’t have to undo the efforts of the JFC and the DTI re the priority industries. But here’s where the challenge lies. Will Juan de la Cruz agree how the conglomerates will divide the spoils among these priority industries?

For example, remember the coco levy funds? Power corrupts and absolute power corrupts absolutely. And so despite tons of money generated by the funds, we never acquired the expertise to make the PH coconut industry truly a global leader for Juan de la Cruz.

That’s what we should figure out next.

In other words, we need more than CSR initiatives from the conglomerates. We need them to spur enormous wealth generation for Juan de la Cruz, not simply address poverty. They must also demonstrate that they aren’t parochial and insular and tap investors and technologies from wherever. The big picture being to generate enormous wealth in these industries.

Development as the blog has constantly raised, is the road from poverty to prosperity as our neighbors have demonstrated.

“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]
Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]
“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, November 2, 2018

Ships passing in the night

"It's not true that the coconut industry does not have a roadmap ... Our problem is that the roadmap is changed with every change in leadership at the Philippine Coconut Authority [PCA].

"[T] he sad fact ... is that we do not have any clear direction for the industry that produces our top agricultural export. We have spent all these years focused on money - in this case, the tens of billions of pesos in coconut levy funds tied up for decades since the Marcos years - and seem to have largely forgotten about the product. "[ In search of a coconut roadmap, Cielito F. Habito , No Free Lunch, Philippine Daily Inquirer , 23rd Oct 2018]  

Here comes the other ship: "DTI has been working together with industry groups in the formulation and implementation of industry roadmaps ... In collaboration with industry and academe, DTI has crafted and implemented a new industrial policy known as Inclusive Innovation Industrial Strategy (i3S). I3S aims to grow and develop globally competitive and innovative industries with strong forward and backward linkages.

"It focuses on building an inclusive innovation and entrepreneurship ecosystem in order to upgrade and develop new industries; remove obstacles to growth and attract more investments and create more and better jobs; and strengthen domestic supply and value chains to enable our domestic industries to participate in global / regional value chains.

"The i3S has five major pillars covering the creation of new industries and new industry clusters, human resource development and capacity building, MSME development, innovation and entrepreneurship, and ease of doing business.

"The priority industries are: auto and auto parts, electronics and electrical, aerospace parts and MRO, agribusiness, chemicals, shipbuilding and repair, tool and die and iron and steel, agribusiness, IT-BPM, furniture, garments / textile / creative, materials, parts and components, construction, and transport and logistics. "[The DTI's holistic approach to solve the trade deficit, RAMON M. LOPEZ, Secretary, Department of Trade and Industry, Manila Standard, 23rd Oct 2018]

If we were in the classroom this will be a very impressive paper - the i's are all dotted and the t's crossed. But we're in the real world and so what we have are ships passing in the night?

"Most of our coconut farms ... remain focused on the single product of copra to be milled into coconut oil, when there is so much more money now being made from coco sugar, coconut water, virgin coconut oil, and fresh young coconut - not to mention various products from the husks, shells, leaves, stalks and virtually every other part of the coconut tree.

"A good roadmap for the coconut industry would seek to reap the most value out of the gold mine that each coconut tree literally is, for our poor farmers sake.

"Meanwhile, we're hearing that coconuts are being massively planted in Northern Australia, Hainan Island and other places where they've seen the great future potentials of the crop. And here we are, still fighting over the money. "[Habito, op. cit.]

This is the year 2018. See what we were talking about in 2012: " Sen. Pangilinan urged the Department of Agriculture to set aside P5 billion from a P27.1 billion meant for irrigation projects and invest the money in the coconut industry instead. 'We need to revive this dying industry, invest the necessary government funding to boost coconut production, ensure the income of our farmers, and develop a roadmap for the sustainability of coconut production,' he said.

"Sen. Angara bats for extensive research and development (R & D) for coconut. 'R & D has the highest rate of return on investment on all economic activities but we have neglected it,' he said. 'To revive the coconut industry, we must revive R & D too.'

"In addition, he urged the Cabinet economic cluster to tap the P150-billion coco levy fund. 'This is a whole lot of money sitting idle, tied up in legal technicalities which we could use for the revitalization of the coconut industry in the Philippines.' "[ Reviving the Coconut Industry of the Philippines,  Henrylito D. Tacio , Gaia Discovery , 22nd Jan 2012] 

What conclusion can we draw? That we're neither here nor there? Unsurprisingly, "The BBC documentary aired last weekend, 'Philippines: Democracy in Danger?' has a subliminal message for us Filipinos: 'Do not miss the forest for the trees,' meaning let's not miss the big picture by focusing too much on individual details. "[Here's what the Alston Report says, Harry; Solita Collas-Monsod , GET REAL, Philippine Daily Inquirer, 6th Oct 2018] 

And so from a recent posting we lift the following: " We are so fixed in our mindset and paradigm that we are still rudderless in the pursuit of industrialization. For example, we like to address the poverty of coconut farmers [despite the tons of money from coconut levy funds.] But what is the big picture if we are to pursue industrialization? It is to exploit this top agricultural export. The operative word is top.

"We keep figuring out how to rapidly drive exports and national income or GDP. 'Top' is it ... but because we are not an industrial economy we do not have the perceptive judgment. There is a body of knowledge behind it (a) from the laws of physics that Pareto codified and (b) in the social science, ie, force field theory developed by Kurt Lewin. And this is not the first time the blog raised it.

"Coconut is a versatile fruit and offers a range of products that will scale the value chain. But we must benchmark the portfolio against neighbors that have grabbed the leadership from us so that we can figure out which ones give the biggest returns and largest margins and must be the focus. In other words, the  coconut industry must be founded on innovation and global competitiveness. That is the big picture - the industry must generate enormous wealth that will lift all boats within the industry, especially farmers, and appreciably raise its share of exports ... and PH per capita income.

"But it requires technology to develop these products. Technology in fact is demanded across the board, from farming to production as well as marketing of these products.  

"But we can acquire technology from other parts of the world and do not have to reinvent the wheel as we like to do. As in: parochial and insular. To develop STEM (science, technology, engineering and mathematics) does not mean reinventing the wheel. How many decades have we wasted and yet are still clueless going forward because we can not shift paradigms? "

Will Australia and China sooner than later put the exclamation point that indeed we are destined to be the regional laggard? Gising bayan!

Why do we seem to take the big picture for granted and are focused too much on individual details? In the IT world there is such a thing as data analytics. And here's what McKinsey says about it:  "The fundamental objective in collecting, analyzing, and deploying data is to make better decisions ... Focus on the outcomes and the business objectives." [ McKinsey Quarterly  - September 2018]

And since we rely on the PSA ( Philippine Statistics Authority) to provide such data, let's check out its (a) Vision and (b) Mission: Solid responsive world-class authority on quality statistics and civil registration; and Deliver relevant, reliable statistics and civil registration services for equitable development towards improved quality of life for all.

At the end of the day, users of PSA data like economic managers must be the ones to heed the advice of McKinsey: "Focus on the outcomes and the business objectives."

And this is where our challenge lies. Juan de la Cruz does not seem to recognize that nations like human beings grow up and develop. Because we are fixated on poverty and people first as in inclusive. Of course, the outcome of development is prosperity.

And being the road from poverty to prosperity is how development is perceived by nation after nation - with the exception of PH. Because our perceptive judgment as the blog has argued is suspect. And it is a function of experience, meaning given our underdevelopment, we have no solid experience in development. And why we are caught in the dilemma of debating which comes first the chicken or the egg. And there will be no resolution to this being a circular argument.

And this shortcoming is magnified many fold in the 21st century because of the imperative of innovation and global competitiveness. Beyond Indonesia our coconut industry will soon be competing against Australia and China too.

What do they see? "There is so much more money now being made from coco sugar, coconut water, virgin coconut oil, and fresh young coconut - not to mention various products from the husks, shells, leaves, stalks and virtually every other part of the coconut tree. " 

With due respect to the DTI secretary, we need more than motherhoods. If we are to catch up with our neighbors and erase the stigma of poverty that comes with being a regional laggard, we can not have the different segments of the public and private sectors be like ships passing in the night.

And if we are to succeed, we must keep the Fitch admonition front and center of our development efforts: "  That PH has (a) lower per capita income and (b) weaker governance and (c) business environment indicators ... compared to our peers . "Ergo: We can not drive the economy against the tide of a culture of impunity that we take for granted, ie, patronage and oligarchy.

If we believe the world will wait for us to get our act together, here is an interesting insight from a certain Bella reacting to a opinion piece in the New York Times, 26th Oct 2018:

"Rural America is a forgotten place that struggles with little hope of recovery. The future does not bode well for rural Americans who would rather remain outside the interconnected world while it changes drastically right before their eyes. I grew up in a rural town but left for a job in the city. Going back to visit, I quickly realize I feel out of place and totally disconnected. The idealistic small town of 50 years ago where we lived a good middle-class life, got a good education and jobs were plentiful are fading. The American politicians these rural voters elect have no concern for them outside convincing them to vote for them. Follow the money. In this country, having no money pretty much means you have no voice.

Even people from wealthy America can be left behind; what more from third-world Philippines? We can not address the plight of the coconut farmers by simply talking poverty. Our mindset and paradigm must be to generate enormous wealth in this industry.

And beyond coconut, we must likewise: (a) benchmark the product portfolios of what the DTI calls the priority industries; (b) figure out which products generate the biggest returns and largest margins; (c) prioritize - and not fall into crab mentality - the ones we must aggressively develop; and (d) obtain the requisite technologies from wherever especially state-of-the-art. And ... generate enormous wealth ... and create the ecosystem for sustainable growth and development.

And that's how we must develop roadmaps ... and after - not before - we ascertained the big picture, ie, the outcomes and the business objectives. And for the enterprise we call The Philippines, that means focusing on efforts that will directly generate enormous wealth. It is beyond a-7% GDP growth rate per se which as we now say is not inclusive.

Gising bayan!

"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]

" Now I know why Paul dared to speak of 'the curse of the law' (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant. "[Faith and Science, Open to Change, Richard Rohr's Daily Meditation, 23rd Oct 2017]
"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]