Saturday, May 9, 2009

Entrepreneurship does not mean local

“Culture . . . and . . . economic policies founded on transparency, convenience and rule of law.” That is how the World Bank defines the bedrock of entrepreneurship, now acknowledged as a key factor in economic development . . . even in prim and proper Oxford University – where traditionally entrepreneurship was not spoken.

The Economist magazine reports that India, China and the U.S. are the most entrepreneurial culture, quoting a study by Monitor, a management consultancy . . . which many have probably read.

The point to make is: in America change is imbedded in its beginnings, history and culture, but China and India? China demonstrated its capacity to change when it embraced capitalism; with India it was by opening up its economy . . . although both countries continue to have harsh critics: China remains autocratic while India is arguably a study in bureaucracy. (To India’s credit, in Bangalore for instance, despite their dreaded bureaucracy they now have a modern airport. Local folks used to say: “I will believe it when I see it”.)

In earlier articles the writer has written about private businesses that have become models of change but countries changing?

In the Philippine when we talk of change we mean ridding the country of corrupt leaders . . . The reality is not unlike private business, if a country and its people are not predisposed to change . . . its system and thus its output will remain the same . . . same old, same old – humans are creatures of habits and habits are hard to break! And this can be rationalized by assuming that we have not found the perfect system to adopt; unfortunately there is no perfect system – to seek one is an exercise in futility. Free market has not claimed perfection, i.e., no two free-market economies are identical.

To be progressive is to be forward-looking; and old habits can rob us of the vision and the confidence to reach for a higher goal.

When we talk about how tradition-bound we are it is either in the context of a joke or an emotional argument. But we can do a compartmentalized change like China and India, i.e., keep the elements of our culture that we cherish but push economic development with a more pragmatic, forward-looking attitude? To China and the Asian tigers, this meant leaving the old ideological debates behind!

Change is never easy whether in the private or public sector.

The Economist magazine talks about how the Indians’ penchant to argue (which used to fascinate the writer up to a point) has become a positive in developing an entrepreneurial culture; but also makes the point that while India’s higher education traditionally produced civil servants, today they are producing entrepreneur-types.

Tom Friedman’s best-seller, “The world is flat”, points out that the turning point in India’s psyche occurred with Y2K: India’s low-cost computing and programming skills absorbed much of the back office work the West needed to prevent a global catastrophe. And so Indians at home and abroad including those in Silicon Valley realized the great potential they had in this field, i.e., the global market dwarfed local boundaries – and simply exploited the opportunity, creating local equivalents of Bill Gates – i.e., getting themselves on the Forbes lists of the wealthiest people. The bottom line: entrepreneurship has gone global . . . beyond local. And according to Monitor, countries that welcome outsiders have seen a higher proportion of entrepreneurs among them versus locals – which should not be surprising to us Filipinos given the predominance of Filipino-Chinese tycoons.

For many years India’s socialist bent meant sub-optimizing and undermining economies of scale in favor of homegrown/cottage industries – such that the national market was not optimally served, i.e., to market nationally meant cobbling together a number of scattered mini-production facilities that translated to high-cost, inefficiency and with quality compromised at best. In fairness, industries that met a set of “high-tech” criteria were allowed large-scale production operations – and not surprisingly this spawned bureaucracy if not corruption.

The Chinese simply wanted a better life; consequently Beijing needed to satisfy this craving. With a billion people wanting a better life, Beijing figured that capitalism was the way to go; and courted foreign investors like no man can – e.g., by being flexible in the construct and ownership of ventures with foreign investors! (In the process the writer learned that communist people could be friends too that gave him the predisposition to become friends with Eastern Europeans much later. His other learning: Chinese leadership would punish corruption within the communist party structure.)

The Chinese and the Thais shared a common desire to absorb new ideas, learnings and investments (to lift themselves up) from the outside. And both learned and evolved to meet world-class productivity, efficiency and competitive metrics that saw their economies growing rapidly from global trade.

The Indians, the Malaysians and the Filipinos shared something in common too: given their facility in the English language it was acknowledged that they were as informed as outsiders and foreigners. Where they differed: India and Malaysia attracted more foreign investors (to compensate for what they lack) and grew their economies faster than the Philippines. Malaysia’s population is a tiny fraction of India’s and a mere 27% of the Philippines, and had to rely on exports to drive their economy, similar to China. Population size was not their common denominator but rather foreign investments and markets.

Some in Eastern Europe – being creatures of habits too – share the Filipino’s instinct that can be tradition-bound while recognizing that life could be better. Will these Eastern Europeans take longer to attain developed-country status as well? And not unlike the Philippines they also have entrepreneur-types. In other words, will the entrepreneurial spirit be robust to overcome old habits?

Developing progressive economic policies (founded on transparency, convenience and rule of law) can indeed be driven or restrained by a country’s culture but as we have seen in other countries, the desire for a better life can be more powerful than any restraining forces.

The global financial crisis has held global trade at bay but in the same manner that we expect OFWs (Overseas Filipino Workers) to continue to find foreign “homes” for their skills and services albeit at a decelerated pace, manufactured goods and other services will likewise find their “due homes” given that countries could not produce the goods and services they need as efficiently as those with comparative and/or competitive advantage, i.e., protectionism is simply impractical – we cannot expect a world where the Middle East will keep their oil for themselves and those with none like us will rely on horses and carabaos for transport and energy. Or what if Thailand or Vietnam cannot sell us their rice?

The good news is the world has recognized the reality – the positives and negatives – of global trade and world leaders have found it wise to come together and aggressively deal with its challenges individually and collectively. Yet we cannot expect them to deliver nirvana given the politics back home they have to deal with – but who says the road to progress is paved with gold?

Subsidies from the West to protect local cotton and cocoa farmers, for instance, have marginalized farmers in developing countries especially Africa – which the writer has seen with his own eyes beyond the horror stories narrated to him. This is a tough nut to crack but Obama and the EU need to step up to the plate (e.g., via Doha) and exercise leadership especially the U.S. if the U.S. is to regain moral leadership and authority.

In the media we have written a lot about Obama: The real lesson of Obama is not color; which he again demonstrated at the G-20. What Obama is is forward-looking; he is about thinking like a winner as opposed to feeling and thinking like a victim. He lost his father – was bounced around across oceans, not spoon-fed, he lost New Hampshire, he lost most of the Republican senators in his stimulus plan – as well as Merkel and Sarkozy – and of course he’s black. Losses don’t deter him. Victimhood is not in his psyche – blaming no one for the card that was dealt him.

Closer to home we have our tycoons who are no different.

Individually we have indeed learned from them like the OFWs, our present-day heroes, and many, many more of us. We, as country, can learn from them too.

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