The reality of our (un)competitiveness . . .

. . . Filipinos would likely laugh about visiting these countries . . .

Tunisia, Jordan, Azerbaijan, Montenegro, Romania, Kazakhstan, Morocco, Namibia, Vietnam, Bulgaria, Sri Lanka, Ukraine, Macedonia . . . plus a handful more . . . alas, have something in common: these countries are more competitive than we are.

The writer has traveled to a few of them, especially Eastern Europe. He finds it intriguing that people who for decades lived under police states could turn on a dime and live out Maslow’s insight, shopping for $200 jeans and $300 iPhones – talk about humanness! On the more serious side, a group of young marketers the writer mentors has developed a simple one-page “marketing for dummies” model. And to the horror of MNCs, these kids are taking regional market shares from them, if not beating them hands down. The largest of the MNCs reported lower sales & profit YTD; while they had their best ever P&L/balance sheet, despite the global financial crisis, thus poised to inflict more damage on the big guys. And so a Western marketing guru had acknowledged them as “best practice” example in a recent speaking engagement.

These people knew next to nothing about capitalism, investment, global trade, etc. But they have been stuffing their portfolio of 3 different but related businesses with higher value-added products (and registering them globally) and generating the capacity to: (a) price competitively with healthy margins and (b) aggressively compete. Beyond marketing, they demonstrate skills in economics, strategy, finance as well as R&D and supply chain. They understand markets and economies and the vulnerabilities of MNCs (cost structure, agility, etc.) and treat them as preys . . . not ghosts to run away from – like we do? And they have a one-page roadmap they call a GPS: they know where they are and where they are going, and as importantly, how to get there.

It would be 18 months since the writer started to engage columnists and editors about our state-of-affairs. And over this period, it is apparent that our way of life has very little propensity for change: (a) we are truly accommodating, hospitable people; (b) the tropics is paradise; (c) our Christian upbringing tells us that every day is a blessing; (c) we are among the happiest people in this world; (d) and we are not about problem-solving or competition or development or progress – we’re about family and destiny.

We would be happy to strike the least common denominator, not the highest per capita GDP. In the meantime we would continue to support our favorite charities and doing so is a feel-good sense. Too bad for the close to 30 million Filipinos who may or may not benefit from the kindness of the rest of us.

On the other hand, we are again pinning our hopes on the next leadership. Leadership is critical . . . like FDR demonstrated. But we will always get the leadership that we deserve – because we vote for those that reflect our instincts? And until we recognize that as a people we need to change, we will perpetuate the leadership profile that we’ve had for decades: politicians pander to popular demands because they win votes – dangling candies and favors.

Popular demands are not synonymous to change. We need to see ourselves beyond a collection of exotic Pacific islands, e.g., scarce resources like human and capital ought to be optimized via ideas designed to travel beyond our shores – in order to leverage economies of scale and the interdependence of nations.

The bottom line: we must first change as a people. But we keep rationalizing our failings? Throwing supposed new widgets to our crisis? But our crisis is decades-old; we don’t need new widgets because we are the problem?

We keep barking at the wrong tree . . .

. . . Our competitiveness dilemma – rooted in denial?

As we continue to debate where we stand economically as a nation, it is not surprising that there are those who are unwittingly prescribing a cure that unfortunately had brought us where we are today: and that is, with the supposed failure of the global economy, we ought to become an island unto ourselves.

On the other hand, the Japanese have finally learned that it is a two-way street: they cannot be open when they are driving exports yet closed for most everything else, e.g., they could use more migrants to mitigate their ageing population. And so they booted out the ruling party that had preserved the status quo for decades – they had to make someone account for their plummeting living standard.

Those who advocate being an island unto ourselves apparently have seen what it’s like outside the country. And they don’t like the quality of life in the developed world – señoritos are the exceptions? Seriously, they believe that every time our leaders had pursued reforms like opening our market, we had to pay a heavy price. But that is a truly narrow view of the world and is reflective of a parochial mindset – the list of countries more competitive and more open than we are is rather long?

The reality is – even in this day and age – we have industries that are crying to be protected: This is the 21st century and we still have industries that cannot stand on their own two feet? Or why in global competitiveness we are ranked below the median!

Of course there are farmers in the West – the US and Western Europe – that still cannot stand on their own two feet, and are protected by politicians opting to pander than to lead. Big guys and bullies will always be big guys and bullies. Life is not fair – as Adam and Eve must have thought. But despite its unfairness, countries that played it smart were able to overcome the imperfections of the global community. And we don’t have to go very far: Asian tigers have demonstrated that irrespective of the challenge – including the 1997 Asian financial crisis and the 2008 global financial meltdown – these neighbors displayed agility and robust economies.

We cannot argue simply and point to the imperfections of the world. We have to grow up and accept the reality that where we failed . . . others succeeded, warts and all – if we want a meaningful and productive self-examination? Nor can a silver bullet come from outside – because we have to dig deep into ourselves to find it?

On the other hand, we seem embarrassed by our ranking in global competitiveness – that we are treating the measures like a punch list of must-dos? In the spirit of nation-building, Ateneo or La Salle or Jollibee or Splash could share how they nurture competitiveness? We need to internalize two complementing imperatives: (a) we cannot continue to sub-optimize and marginalize our human resources by exporting maids and seamen, instead of exporting higher value-added products and services; and (b) industry must, in the first place, optimize capital by generating higher value-added product ideas and/or services targeted to the bigger market or, say, region of 600 million people like Malaysia does, beyond the 90 million Filipinos? The business section of our dailies should have a regular column on these imperatives rather than applauding monopolist tendencies!

These pillars of our economy (capital and human resources) are the critical building blocks where it is imperative that we inject competitiveness? Our failing marks against the competitiveness yardsticks are merely symptoms of what really ails us?

In the meantime hunger to 27-30 million Filipinos is real. The writer has used Fortune 500 as an example (early on) because in that environment problems are fixed or they pay dearly.

Competitiveness is a state-of-mind . . .

. . . e.g., The Parable of the talents

The global economic crisis has resuscitated the old debate: Capitalism is bad. And greed is the flashpoint.

But is greed really about our humanness, e.g., Adam and Eve? What about the tsars? Were they capitalists or virtual monopolists? Those visiting the Palace of Catherine the Great or Peter the Great or the State Diamond Fund museum in the Kremlin or the State Hermitage Museum would sense the reality of: our humanness, power and greed? But the tsars lasted less than 200 years, shorter than successful global businesses, i.e., ideas and knowledge – not power – make for sustainability. (The same values espoused by Andrew Grove, the man behind Intel, whose family had to escape from the Nazis. And at New York’s City College he learned to reject hierarchy.)

The Soviets then saw that socialism did not work either: investment and production are not immune from the law of nature – resources must be replenished! Ignoring resource-replenishment via giveaway pricing guarantees failure – their inability to ration bread to their satellites; despite the wheat farms in Ukraine being as extensive and breathtaking as those in Washington State. Is it why the Vatican and the Archbishop of New York are savvy financial managers? (Much closer to home, our failure in reforestation – replenishing resources – has guaranteed devastating floods; and we are doing hoot?)

The good news is the world has learned from the Great Depression and has collectively intervened to rebalance the outcome or excesses of human greed. And once again the Asian tigers, given strong economic fundamentals to begin with, have led the world with a robust rebound. They were not debt-ridden and thus were able to aggressively pump-prime and create domestic demand. Australia and Norway are resilient as well.

In the Philippines, hopefully we don’t fall into the trap of justifying our failings – by invoking ideologies and treatises more apt for academic discourse. Even Bernanke has realized that what seemed sound within the confines of Ivy walls (e.g., central banks could override and extend boom periods via aggressive monetary intervention) would not necessarily match the realities of the global economic crisis – i.e., unfortunately, it could engender greed and create a humongous bubble.

Ex-communist countries likewise have learned their lesson and have become outward-looking and unsurprisingly, are now more competitive than we are. They: (a) have not become economic liberals, (b) don’t claim any form of ideology and (c) are merely seeking a better life. And in the process have realized that they need to be competitive. That competitiveness is a state-of-mind and that true competitiveness does not stop at the nation’s doorstep. It must be carried beyond to achieve its real potential: They have experienced: (a) the reality of economies of scale and (b) the interdependence of nations, e.g., they need oil and gas which they don’t produce – two fundamental realities that we don’t seem to delve on, i.e., we have yet to experience global competition? To these ex-communist countries globalization is about pragmatism and competitiveness or “blocking and tackling” – and not about sophistication or intellectualization.

Do we instinctively fear competition because we are small? Is it because being sheltered is safer? Is it because we have not tested our ideas beyond our shores? Or is it because we want to preserve the status quo – unwittingly perpetuating a nation of haves and have-nots?

Fortunately, companies like Jollibee and Splash have not taken an inward-looking bias. They should be our 21st century model; their mindset is that of a competitor – not a monopolist, from a bygone age.

“Lugao” on board the QV

(OFWs were half of the crew of a thousand)

Talking to Filipinos working in the Queen Victoria, a cruise ship out of Southampton in the UK, reminds the writer of the number of Filipinos contributing to keep the US health care industry functioning: together they are among those sending home $17 billion or so annually that keeps our economy going. (The writer’s son-in-law was all praise for the Filipina nurse who took care of him, a couple of years ago when he was in hospital in Greenwich, Connecticut.)

While we say we acknowledge OFWs as true and present-day heroes, it is about time we get past lip service? We can at our peril continue to put on their shoulders the task of keeping us afloat. In the first place, they are doing what they are doing because of necessity, not choice. They are away from family: “We’re not here to sightsee; we don’t have the luxury of time, all we are focused on is work – because back home we can’t find jobs that would pay for our needs, so that we had to take on work unrelated to our formal education. I went to nautical school but I am making more money as a waiter in this ship.” (This is not an exception: we have teachers that have become maids and doctors opting to be nurses.)

In the bigger scheme of things – or where we are in global competition – we are competing for lower value-added labor as opposed to higher value-added products and services. This explains the woes of OFWs – or why as a union they wrote a manifesto criticizing the country’s economic model.

There is a clear, vast disconnect between what these OFWs are going through and the positive feelings we have about the foreign exchange they generate – that likewise stabilizes the peso and benefits all of us via the wider economy. What is appalling is politicians have the gall to take credit – and economic managers too?

These OFWs are out in the open, competing in the global arena – and are world-beaters. On the other hand, our industry does not see the need to compete: they are rewarded albeit confined to the safety of our four walls, thus making us the least competitive in the region and effectively risking the future – a disease we have yet to realize like the Dutch before us, i.e., nations need a strong, sustainable industry base, of higher value-added products and services.

In the final analysis, our OFWs will continue to toil overseas because our current economic model does not generate local jobs to come home to: We are not truly gearing up to become globally competitive – which is the way to lift our GDP substantially to make a difference. And to get there we have to aggressively step up efforts to raise our revenues; and to do so we must seek more input/investment including foreign, and cast our nets wider beyond our shores – because local marginal enterprises (as Spain learned but Latin American countries and we, have yet to learn?) won’t cover our revenue/GDP-gap or why the ADB prognosis re our development is not encouraging.

The Filipino crew in the QV was well-liked: they could work with varied nationalities, including the Brits that comprised 83% of the passengers – and for their Filipino-couple passengers, they prepared “lugao” or chicken rice porridge for breakfast. They received kind words and in some cases generous tips (and recognition from their company) for their demonstrated dedication and skills – from the engine room to the staterooms to the dining rooms and beyond.

We ought to provide them a better economic playing field lest these assets remain marginalized at our peril.

Start with the end in view . . .

. . . It’s another way of dissecting our economic woes

When responding to a challenge, people and nations tend to figure out what the first step ought to be – because logical thinking can easily migrate to sequential or linear thinking and thus a ground up process. But that can also yield sub-optimized or half-measures because it is activity- as opposed to results-driven.

Farmers know this from experience – without silos to preserve their produce, the harsh cold months would ruin them; and so they work back to establish the absolute start date to commence the farming year. The writer heard this from a priest who grew up visiting his grandparents’ farm: “Do you know how farmers are able to drive their tractors on an absolute straight line – or why vineyards and orchards are so lined up? My grandfather showed me how to drive a tractor after I messed up my first attempt. As I sat next to him on the tractor he said: pick a spot at the farthest end – that will be your goal. And keep your eyes focused on that spot and your brain will guide your hands to your goal.”

Educated as we are especially in business, we likewise learned planning and budgeting, yet universally people from whatever country (we’re not alone) find themselves thinking from the ground up. Kennedy demonstrated how it should be done instead when he set a goal for man to get to the moon within a decade. It does not have to be as complex as getting to the moon – it can be as simple as getting to our next appointment or even to work on time.

If we benchmark our economy against our neighbors, we see that we have a $100 B shortfall in revenues or GDP – how much do we have to scale-up marginal enterprises to come close to that number, i.e., they most likely will yield sub-optimized or half-measures? $100 B should be our farthest spot, our goal – and we need to keep our eyes focused on that goal.

And then we can work back – which lends itself to lateral or creative thinking: where will these revenues come from? This is not the time to eliminate options, instead we should put every option on the table – whether electronics, agribusiness or BPOs or whatever. The key is to develop and then pick and choose higher value-added products and/or services that will generate healthy market shares and margins, and achieve sustainability. A product does not always have to be an outcome of creative destruction – it can be an update recognizing that Maslow’s hierarchy of needs is the core of consumer needs. Products can be retro (fitted) or recycled or upcycled to respond to ever changing consumer needs – or why Steve Jobs is able to build on supposedly standard if not sunset products. Products can be rural-based or urban-based so long as they are not sub-optimized. They can be capitalized locally and as importantly, by foreigners – who have access to a larger capital- or resource-base. But foreigners will not just come to us. We have to demonstrate that we have the wherewithal to become globally competitive: that we are casting our nets wider beyond our shores, seeking resources – from capital to technology to talent to market access – in order to optimize the options the global community has to offer. They want the best yield – or the most efficient use of resources!

Unfortunately, our mindset is stuck – to the status quo. And when foreign investors see this, they tend to invest elsewhere. Have we paid attention to the suggestions from the foreign chambers, for instance? They may have their own interest at heart but our posture ought to be to seek the right combination of resource options, and so we should more than humor them?

There is a reason why there is a global ranking on competitiveness – because emerging countries as well as long-developing ones like ours cannot rely on foreign aid alone. We have to become active participants in the global economy – so that later on we would have the ability to “raise all boats”.