Thursday, December 29, 2011

The unromantic Italian

"Premier Mario Monti outlined his austerity package to union leaders and a youth delegation at a cabinet meeting in Rome, after which he said “Italians are to blame for our public debt," reports WSJ, 5th Dec.

Leadership indeed demands 'selling' one's game plan if it is to get ‘buy-in.’ But it also is objective, calling a spade a spade so there is clarity on what the challenge is and its ownership, thus raising the probability of execution. [Execution is the acid test of competitiveness and thus while access to information is democratic, there is only one Apple, for example.] It takes a big person to admit to a big sin; and it takes true leadership to get the people take ownership of a nation’s failings.

But there is a positive dimension to accepting failures, and as Christians we know it as repentance and faith. Yet human as we are, it is not easy to accept half a century of mediocre performance. Should we then lift a page from the playbook of the private sector? Business managers have learned that accepting failure is the first step to redemption; and Europeans are quick to point out that the American bankruptcy law has proved to be an advantage for the US. But then again, redemption has been in the fabric of the American culture – and so to be holier-than-thou is ridiculed – though the hypocrisies coming from some quarters are growing.

How does the private sector do it? To reinvent an enterprise, they pursue the development of a ‘new culture’ that would sustain success. For example, A.T. Kearney, a consultancy, has identified five common culture dimensions world-class organizations possess: (1) achievement, (2) customer, (3) innovation, (4) people and (5) efficiency. They also recognize that the key is to focus on a couple while ensuring that they don’t turn their back on the others. Put another way, no organization can be tops in all dimensions.

Applying this set of dimensions to the Italian challenge, clearly they would want to reinvent themselves and be committed to ‘achievement.’ And that would mean lowering the national debt while investing in innovation in order for industry to be competitive, for example. (And Fiat-Chrysler is showing the way. Chrysler has had a dramatic turnaround from bankruptcy two years ago, accounting for two-thirds of Fiat’s latest quarter profit, with US auto sales up 25% this year, owing to a revamped product portfolio, Reuters, 6th Dec.) Italy could also address the issue of efficiency since many tradition-bound Italian businesses have yet to adopt 21st century practices. “A lot is at stake; we cannot permit ourselves to live the way we did before,” says Monti, [and] “he is facing a power battle — and a culture clash — with lawmakers.” [NY Times, 16th Dec.]

Clearly in the Philippines it is a must we demonstrate a culture of ‘achievement’, recognizing how dismal our economy has been for over half a century. And just like the Italians, we need to in short order pursue innovation to be globally competitive. And it follows we have to be more efficient, starting with the building blocks of power generation, basic infrastructure and strategic industries.

In the meantime the Italian premier is demonstrating that to be an unromantic Italian is in fact what patriotism or nationalism is about? In short, we need to become bigger men and women and admit to bigger failings? We could only reinvent ourselves to the extent that we admit our failures. As social psychology (c/o Kurt Lewin) tells us, we have to unlearn [or unfreeze] so we could provide room to relearn [or change and refreeze].

Our leadership could similarly fine-tune its ‘selling job.’ Beyond pushing ‘daang matuwid’ President Aquino would do the country a big favor if he is able to get ‘buy-in?' And which should give him the ability to lead us to reinvent ourselves by focusing on a couple of culture-like dimensions?

Monday, December 26, 2011

Critical thinking in a soft culture

‘We must undo the damage of a misguided culture perpetuated by corrupt politicians and businessmen, power-hungry and greedy tyrants, the powerful forms of media and the apathy of many citizens (whose disheartening response to the mess around them is to go abroad) who defuse the fervor for genuine social change. It is not the Filipino culture that is damaged!’

That is paraphrasing one of the responses at the one-day Rizal @150 Anniversary Conference on Nation and Culture held last 3rd Dec. [Thanks to Dr. Florangel Rosario Braid.] A couple of issues raised at the conference drew the writer’s curiosity: how to internationalize the Filipino outlook; how to take advantage of the Filipino’s ability to adapt to changing circumstances as it competes in the global economy; and redefining the Filipino citizen as multicultural, multireligious. But do we accept that ours is a soft culture as Lee Kuan Yew says? Do we believe that ours is a hierarchical culture? Could they be behind the ‘misguided culture’ being perpetuated by a few? Is our softness reinforced by how we see ourselves in the social hierarchy, i.e., helpless? And so we tolerate corruption, power-seekers, greedy tyrants, and the powerful in the media because of that helplessness – and going abroad becomes an escape?

Because of our softness our bias is for inclusion (and miss the imperative to prioritize and focus) and see poverty as our biggest challenge? But isn’t poverty the outcome of underdevelopment? Or is our default-model the US, where they also have to fight poverty (in reality the core of compassionate conservatism to counter the perceived insensitivity of "laissez faire conservatism")? But to compare poverty in an economy where the per capita income is $3,500 (PHL) versus $47,200 (US) is comparing apples and oranges? Shouldn’t we be comparing ourselves with Thailand ($8,700) or Malaysia ($14,700) or any of our neighbors? These countries have reduced poverty substantially by pursuing economic development! Our income of $3,500 is simply too meager to spread around! And worse, the thought perpetuates our ‘crab mentality’?

Taking a page from the playbook of the private sector, when the revenues of an enterprise can’t cover its expenses, the marching order is to drive profitable growth. The writer is reminded of the 9 years he has spent in Eastern Europe. (And why our messed up economy would take a generation+ to fix.) And the one thing they haven’t stopped talking about is the imperative of gross margins. When he arrived, his friends proudly claimed that low-pricing was their advantage over MNCs – “because the people are poor.” Unfortunately they were not making the margins to give them the firepower to compete, and worse, were an unprofitable enterprise. They’ve learned since but are keeping the focus on gross margins. As the organization expands even those coming from MNCs could instinctively see driving sales as the key, unwittingly compromising margins. It’s giving away the store! And to enlarge national economic output or GDP, enterprises must by definition be sustainable!

The solution is simply innovation – not our celebration of monopoly and oligarchic power – to be able to create products (or services) that the consumers will value at a price that generates healthy margins. It is what competitive advantage is about! And competitiveness is driven by investment, technology and innovation, and talent, product and market development! It also applies to the Philippines? Our GDP is dependent on a consumption-driven domestic economy – which makes us proud because we have many successful local enterprises, but the big picture punctures that confidence. We are unable to match our neighbors’ economies especially exports because we are not competitive, and thus have become economic laggards!

Our biggest challenge is not poverty but development. And to get there, we need to focus on competitiveness. And it starts with the building blocks of power generation, basic infrastructure and strategic industries that will develop competitive products. And how could we address our soft, hierarchical and parochial culture? It’s a challenge to our institutions especially the church and education. Adam and Eve were driven out of Eden; Christ was a pain to the hierarchy in his community and beyond, and he embraced the Gentiles, foreigners and sinners!

Saturday, December 24, 2011

Connecting the dots

Two articles on a Sunday morning would remind us about the failure to connect the dots that was blamed for 9/11: (1) Filipino culture, Manila Bulletin; and (2) Manny V. Pangilinan pins down Roberto Ongpin, Philippine Daily Inquirer, 4th Dec.

It appears National Artist for Literature F. Sionil Jose and Sen. Edgardo Angara are connecting the dots – that the common denominator to our woes is our culture, or not exactly? “One generation has come and passed, yet we are still beleaguered by many of these same problems. Underlying all these is our troubling lack of a sense of identity and nationalism,” writes Sen. Angara.

The article about Ongpin confirms the obvious that all the parties involved in the alleged “insider trading” are in the board of the subject company. But reading the article, it is obvious too that Pangilinan has been distanced from the controversy even when the three-way transaction would respond to his pursuit of ownership control? Are at least three elements of our culture, again, obvious? Its informality makes it laughable for David [of DBP] to utter that the subject transaction was arm’s length; Pangilinan deserves deference because he occupies a higher tier in our hierarchy; and that crony capitalism is our “equivalent” of motherhood and apple pie?

The story of Pangilinan has made him a celebrity, the well-known secret, starting with his representation of foreign interests. And having been installed at the highest levels in our hierarchy, we have accepted his genesis like compassionate Christians must; and of course, the investments that his group undertakes are good for the economy. And in fairness we recognize his talents. Yet it fuels our credibility problem with foreign investors: crony capitalism is alive and well! Add that to our restrictive ownership rules, foreign investors won’t touch us with a ten-foot pole. Net, despite the expanding empires of our tycoons, our investment levels remain shabby – and we are missing out on 21st century technology and innovation, thus undermining our competitiveness! Industry needs the platform of technology and innovation if they are to develop the instinct and the confidence to invest in and pursue talent, product and market development – that are critical to a nation’s competitiveness.

But we’re Christians, says Ateneo? [With due respect.] Or is it simply that hierarchy and parochialism are indeed second-nature to us? Plagiarism even in a premier educational institution could be forgiven – and it was not him, it was a lowly speechwriter! Is it another element of our culture, the absence of accountability, which brings us full circle to how high we value hierarchy especially within our own backyard? It is indeed unfortunate but not surprising that the rankings of our educational institutions against the rest of the world are on a downward trend. And it mirrors our economy, governance and competitiveness; the net of which is nagging poverty in the midst of oligarchy!

What about Ongpin? I am simply a smart businessman? And David? I made money for my bank? And they represent our movers and shakers? Should we start dissecting authenticity as it relates to our instincts or why we struggle with the rule of law and why we tolerate delayed justice – which in fact is no justice? Or should we step up political maturity demanded by a democratic system?

Is our soft culture – which values deference – at the core of our wretchedness? And which explains why a Marcos could last 20 years, only to be followed by one, if not two more? But beyond our shores it doesn't cut, thus while hardworking Filipino women hold their heads up high, many have been stopped at foreign borders – profiled as coming from a backward, oligarchic and corrupt nation? And how do we muster the motivation to engage in broader issues when our comfort zone is parochial, if not narrow? Unsurprisingly we are the ‘silent group,’ whether in the majority or minority, at home and abroad?

Tuesday, December 20, 2011

Play-by-play, ‘groupthink’ and myopia

“My father told me not to believe in authorities or celebrities – that society tends to imagine them as superhuman. It's good advice. People are snowed by celebrities all the time. In academia people have this idea of achieving stardom – publishing the best journals, being at the best university, writing on the hot topic everyone else is writing about. But that's what my father told me not to do. He taught me that you have to pursue things that sound right to you. In 2004, when I wrote the second edition of my book Irrational Exuberance, I said in the preface I was worried that the boom in home prices might collapse, bring on bankruptcy in both households and businesses, and lead to a world recession. I remember thinking that this sounds kind of flaky – nobody else is saying this, I can't prove it, this could be embarrassing. But I had learned from my father not to care what other people think. This was my book, and I believed this, so I just said it.”

That’s from the 12th Dec. issue of Fortune magazine, “The best advice I ever got,” from Robert Shiller, Yale University economist. And it seems just yesterday when Shiller was on TV discussing his book, and like most US residents (half of whom are invested in the stock market) the writer and wife were glued to the financial channel, enjoying the play-by-play (of the stock market) from their favorite anchors, effectively dismissing Shiller. And so it’s not surprising that Filipinos are critical of Americans for their short-term orientation. But aren’t we falling into the same trap; and beyond the focus on the play-by-play is the manifestation of groupthink if not myopia?

We have all become economists dissecting GDP numbers by the fraction and by the quarter? The Aquino administration (and even Obama) went through a learning curve, and still struggles to get the PPP initiative going. And if reports are accurate, they found a government that ‘sucks’ – corruption was a way of life! Did Mar Roxas find it too? The DOTC is notorious for big time corruption as the World Bank complained about?

In fairness, doing a play-by-play is important, except that in the case of our economy much of the hurdles we face go deeper. And in the private sector, a similar challenge would call for restructuring! Is Juan de la Cruz predisposed to restructuring? For example, even a 7% growth in GDP unless sustained over a generation+ does not mean economic liberation for Juan de la Cruz – which we conveniently forget! And we’re hyperventilating over one quarter or one year? (And instinctively we don’t ‘start with the end in view,’ which also explains why despite their artistry, Europe is behind the US in product idea commercialization.) We are dealing with a dilapidated structure that must be razed to the ground? Half a century of failure to build the requisite foundation – e.g., power, basic infrastructure, strategic industries – is akin to building a house upon the sand? But human nature takes the easier path, confirmed by the work (intuitive heuristics) of Nobel laureate Daniel Kahneman.

And given our soft culture, how many Filipinos would accept the advice Robert Shiller got from his father? And while we now appreciate the imperative of investment, we have yet to overcome the bias for oligarchy – despite our ambivalence – over foreign investment. And it also goes with professional services. The Philippine elite – including professionals – like its oligarchy, influence the directions of the country; and in both cases, parochialism has triumphed under the guise of nationalism and patriotism? Unfortunately, parochialism has effectively starved us of technology and innovation. How much damage has been done over decades is not easy to quantify, especially with something that is second nature to us?

And it’s never easy to accept a national failure; but it is ‘painless’ to do the play-by-play, and succumb to groupthink if not myopia? In the case of the US, the damage was so severe it triggered the global recession that the world is yet to overcome. Robert Shiller was a lone voice in the wilderness? [Shiller reminded the writer of ‘groupthink’: “It is the mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives . . . The majority of the initial research on groupthink was performed by Irving Janis, a research psychologist from Yale University, 1972,” Wikipedia.]

Thursday, December 15, 2011

Beyond meaning well

Given where we are as an economy and as a nation, it’s not surprising every Pinoy wants to offer our two cents. And we all mean well! And it appears Mar Roxas is acknowledging that with his clarification on the renovation of NAIA 1. He probably needed sufficient time – rather new to the job – to get a good handle on the challenge. Early on he was for focusing on Clark. And it wouldn’t be surprising (given all the hoops the government has had to go through with NAIA 3) that there was a school of thought that we ought to start with a clean slate, and Clark offered that option.

Not knowing Mar Roxas, it appears that in tapping the expertise of the folks behind Singapore Changi Airport, he was benchmarking not parochially but globally – which is bound to ruffle feathers! When do we start to learn to be outward-looking? Haven’t we been punished enough – becoming economic laggards – by our inward-looking bias? It cannot be overemphasized that we are competing not only for tourists but in the bigger global investment and trade arena. It’s noteworthy that the cabinet’s economic cluster is well aware of the challenge and raised the issue of our airport woes. And since they impact our competitiveness efforts, the NCC has rightly taken the initiative as they focus on upgrading our airport and elevating our image.

Defining a challenge means identifying both the soft and hard elements of the problem. And again, Mar Roxas seems to remind people about this: we must put priority on the structural issues of NAIA 1, i.e., the hard elements. The aesthetic obviously is among the soft.

Applying the same yardstick, the challenge to raise our image has its soft and hard elements. The soft elements start with the fight against corruption that President Aquino is pursuing. And, of course, we’re not just about beautiful tourist attractions but more important is the beauty and hospitality of the Filipino. We also have been home to foreign companies and that our financial and commercial infrastructure is fairly well-developed. Yet, one of the biggest turnoffs to foreign investors is our oligarchic culture nurtured by political patronage and crony capitalism – the latest being the Senate investigation on the alleged insider trading that allowed the Pangilinan group controlling interest over Philex. Foreign investors are well aware that the chips are stacked against them – until they indulge in our game! And that is reflected in the meager foreign investment levels that we generate. What are we doing to truly level the playing field? Have we internalized that beyond our cacique orientation, progressive investors bring along technology and innovation that we sorely need to raise our competitiveness? We have for decades been indulged in self-flagellation, and wonder why neighbors continue to outdo us in exports?

It will do us a world of good when presenting and communicating the image we want to the outside world, that we are able to address these soft factors. And we should do the same with the hard elements. For example, what are we doing with power generation? That is something we must address in our image-building initiative. That we have a high-level effort (from the top of the house?) to fix the problem and make our industry cost-competitive, for instance? How much have we integrated manufacturing zones with infrastructure and logistics? In short, how efficient and cost-effective is our manufacturing environment? Again, it is something we must include in our image-building communication campaign. In a word, even advertising must pass the test of transparency! And transparency comes from authenticity!

Communication in marketing or advertising has to satisfy the hurdles of rational, emotional and experiential benefits. Enormous resources can be wasted if communication is not world-class, and cannot appeal to the human senses – or what marketers call 360-degree marketing. And just like Mar Roxas is benchmarking globally in raising the yardstick to measure NAIA 1, efforts to communicate and elevate our image must likewise be benchmarked globally. Consumers especially in this day and age are well-informed – and so smart marketers do, and indeed must, have a lot respect for them.

Monday, December 12, 2011

Competitiveness is measured beyond local

Though they are the exception, it is truly encouraging that some of our enterprises are venturing outside the country. It is by so doing that we would develop the wherewithal and the confidence to be world-class. Practice makes perfect.

The writer and his Eastern European friends were recently in Barcelona where 110 European enterprises were honored in the annual European Business Awards. Indeed it was a great accolade for this select group: the field that met the parameters of the awards started at 15,000, delivering over a trillion dollars in revenues and employing 2.7 million people. In short, the best of Europe’s industry were represented. As the European trade commissioner enthused, he was very proud of all 110 businesses for demonstrating excellence despite the global economic crisis (for which, unfortunately, Europe is as much to blame.)

The writer's friends – and deservedly so – had to be very proud given that barely 9 years ago they were a cottage industry in the middle of nowhere, best described as a fledgling business out of a dilapidated ex-communist facility.

To venture overseas, Philippine enterprises will have to shed our mental model of monopoly power. We may not realize it but our backwardness is magnified for the rest of the world as we keep celebrating oligarchy. It is as bad if not worse than our underdeveloped infrastructure. And one could just sigh when some of our best thinkers blame President Aquino for our inability to attract foreign investors. We have as a people and as a nation more than convinced the rest of the world – many times over – that we are a parochial nation! And so they don't want to touch us with a ten-foot pole! We are to blame, not the president!

And we can complain how hostile global trade could be – and it is especially if we expect handicapping to benefit us. But the reason the writer committed to assist his friends is precisely because they had no qualms about unfriendly competition and markets – and yet they're ex-socialists! It is the same principle great teachers adhere to: if the student hasn’t learned the teacher hasn’t taught! Put another way, a business no matter how small is worthy of global competition if they stand on their own two feet! Of course, they must have a positive and a confident, forward-looking bias. They must be committed to investment – no matter how small at first – and as importantly, invested in technology and innovation, and talent as well as product and market development!

To narrow one’s perspective (even in a poor country where the conventional wisdom is only cheap, so-so quality products would sell) will from the get-go undermine innovation thus the competitiveness of the enterprise. This was the first reality that the writer’s friends had to confront – and with great difficulty. For example, they had to learn the nuance between value and price, margins versus costs. Ergo: investment, technology and innovation can’t be taken for granted. Philippine businesses need to fully comprehend what they truly mean – and as importantly leverage them – in a globalized and highly competitive world!

Unfortunately, our comfort zone – of monopoly power – robs us of the hunger to be truly globally competitive. Hierarchy allows us to lord it over, blinding us to the reality that competition is egalitarian! Crony capitalism, as we know, rewards rent-seeking oligarchy with plum enterprises and access to capital! In the end Juan de la Cruz pays a heavy price: (a) directly like the coconut farmers; and (b) even more profoundly given that this lopsided economic structure does not advance Philippine competitiveness, nor does it raise national wealth for the common good – as demonstrated by the last half century.

We don’t want the slogan ‘Backward, Oligarchic and Poor’ associated with the Philippine brand? That will indeed isolate us – be admired but dismissed as ‘just an exotic South Pacific archipelago!’

Saturday, December 10, 2011

Peeling the veneer

The global economic uncertainty has shaken even self-confident France. ". . . Dreams are unraveling . . . according to a Pew Research Center survey only 27% of the population now believes that 'our people are not perfect, but our culture is superior," NY Times, 21st Nov.

Russian-born author Elena Gorokhova, in her memoir (A mountain of crumbs) about growing up into young womanhood, describes the lectures she attended while training to be a tourist guide: "Leningrad – the cradle of the Great October Socialist Revolution. The rules are simple: They lie to us, we know they're lying, they know we know they're lying but they keep lying anyway, and we keep pretending to believe them.”

People go through self reflection. Should we, Filipinos, define our challenge as the imperative of inclusion? For half a century our economy was growing at 1.4% while our neighbors did as much as 6%! This bit of news hit the writer like a ton of bricks since it was the referenced period (1960-2008) that he thought defined him. Put simply, he is very much part of our failings as an economy and as a nation. It is a very telling point if we are to understand why in the 21st century we are the economic basket case of the region! We have to peel off our romanticism, call a spade a spade! There is absolutely no way to be inclusive doing a measly or a frail 1.4% for half a century! As we know in problem-solving, fallaciously defining the challenge puts us on the wrong path! [And fallacy comes from intuitive heuristics, e.g., rule of thumb as expounded by Nobel laureate Daniel Kahneman in ‘Thinking, fast and slow.’]

Economists say we must grow at 7% and even at that rate it will take more than a generation for us to be a developed economy! But our bigger challenge is masked by that impressive number – in reality another form of romanticism if we don't deliver sustainable growth! The bottom line: Our challenge is bigger than President Aquino. But he is part of why we are what we are – we are all in the same boat that we created! Our challenge is not about the imperative of inclusion. It is about the imperative of development. And development requires erecting the building blocks that will make growth sustainable. But we won’t even get the first floor up if we stick to tooting our individual horns – we badly need to toot our horn as a nation! The JFC has provided a model via ‘Arangkada’ – which unfortunately will take ‘eons’ for us to internalize. To undo 48 years of mediocre economic performance will more than bruise the ego of Juan de la Cruz. It will shake his spirit more than currently felt by the French!

We have yet to demonstrate it, but we must learn to focus and prioritize – e.g., power, basic infrastructure and strategic industries. We can’t simply be rooting for our favorite oligarchy; they have contributed to a very large extent to our cellar-dwelling performance. They reinforced our mistaken belief – poor as we are – that capital puts them at the top of the pyramid. Capital employed to perpetuate a lopsided economy is the unwise – beyond self-serving – use of God-given resources. And with their cohorts in politics – and with our acquiescence – they shut out foreign investments, technology and innovation, the wise use of God-given talents. But they also had been aided by our own education mindset. Education is meant to be inquisitive, expansive and by definition outward-looking.

And thus parochialism must be addressed and overcome by education? But our outlook was influenced by our parochial religious orientation, which treated us like juveniles? Christianity is about maturity, not about being holier-than-thou, which we perpetuated via our sheltered culture. Unfortunately, tyranny thrives when people are shielded as the Arabs have realized. But the good news is Christianity is about embracing the Gentiles and foreigners and sinners. And so how do we begin to fix ourselves? Should we try authenticity?

"We don't have sex in the Soviet Union," said a woman from the Ministry of Culture, when a French reporter asked a provocative question about Lelouch's film 'A Man and a Woman.' Is it possible that . . . sex had been successfully eradicated by the Great October Socialist Revolution, along with social inequality and decent shoes? . . . In spite of my country's taboo or my mother's silence, or maybe because of it, I've taken the initiative to investigate the subject on my own." [ibid]

Wednesday, December 7, 2011

Competition is egalitarian

We can easily intellectualize the connection between competition and equality? Yet in our heart of hearts we value hierarchy? And we’re not alone. Many Eastern Europeans migrated to the West only to return – it’s just not the kind of culture we’re comfortable with. ‘It’s the quality of life, stupid!’ [Who would not want to be chauffeured around by Stefan or Stani or Hristo?] And now the new world order demands competition? “Better collect and hide the ID cards of our grandparents – so they can’t vote – and save the country.” It’s the running joke heard from Eastern Europeans. Their elders despite the dark ages they went through under communist rule could not imagine themselves in a world that demanded competition.

It is not surprising that people who see themselves within a hierarchy but not the leadership would behave as such: “You have to tell me what I must do. When you tell me to jump, I want to know how high!” It’s one of the unfortunate characteristics of hierarchy. The reality is competition, which is what the 21st century is about, presupposes that nations would see themselves paddling their own canoe. But we commiserate with relatives living in the West: “Our quality of life is much better and more desirable that yours!” Eastern Europeans feel the same way, and they are horrified when they watch German TV, for instance, and hear that 18-year olds are expected to be on their own!

It is encouraging that we are in serious studies figuring out the resolutions of nagging challenges – from electricity to mining to car manufacturing to name just a few. Yet, the fact that for practically half a century we were growing at a pathetic 1.4% would explain why we’re still troubled by these problems – especially when neighbors did as much as 6%! It’s painful but we have to face up to this sad reality! By German standards, we’re way pass being an 18-year old! And even Adam and Eve were driven out of Eden – expected to be on their own!

For almost half a century we were proudly tooting our quality of life! But what is even more frightening is if we’re still in la-la land – and don’t recognize the 18-year old rule? Which means that another half a century can elapse and we would still be blaming everyone and his uncle instead of paddling our own canoe?

It is no secret what created the West – i.e., the Protestant or Christian work ethic! Of course as the world now knows, they have forgotten the reason behind Thanksgiving, i.e., to be grateful for the fruit of their labor. Like the Golden Calf, the fruit became the be all and end all – the virtue of hard work was supplanted by the “value” of avarice.

But that does not give us license to be ‘holier-than-thou?’ In fairness, the West took the parable of the talents seriously? But did the church fail us or are we simply the referenced ‘not good soil?’ In fairness too, we have been doggedly addressing the elements of our dismal competitiveness rankings. But our competitiveness rankings simply reflect the outcomes of our economic, industrial, political, education, social and other institutional efforts. Put another way, they are a reflection of our values and our culture. And as long as we take our values and culture for granted – that they are in fact hard and fast and are a given – we would not be able to reinvent ourselves. Half a century of pathetic economic and human development simply points to the imperative: to reinvent Juan de la Cruz?

But what are we talking about – same old, same old? With our meager GDP person and no sustainable economic engine, we are back to our comfort zone – local consumption! We have grown the local economy to over $100 billion – comparably better than our neighbors – principally owing to OFW remittances. Unsurprisingly our basic industries (the favorite of oligarchy given that their bare bones equate to rent-seeking) will continue to prosper and reinforce our lopsided economy while Juan de la Cruz goes hungry! Aren’t we supposed to be smarter than that?

Sunday, December 4, 2011

Beyond entrepreneurship

Friends often proudly tell the writer that Filipinos are entrepreneurial and they don’t necessarily have to be big but they thrive. And the writer remembers a pretty recent trip he took from SLEX all the way to Antipolo and around Laguna Lake and back to SLEX. Indeed, in every other corner if not every, one would see business activity – not exactly like Chinatown but still dense. And decades ago the writer had travelled the country a few times representing his employer and worked with SMEs – aside from having already put up a family business.

In far away Italy, WSJ (14th Nov) reports: “Italy's economy today is only about 3% bigger than a decade ago. Many factors have contributed to the country's stagnation—from its rickety education system to its low rates of employment among women, youths and older workers. But a central reason, say economists, is that its private sector consists mostly of small mom-and-pop businesses that seem unable to grow . . . Unions, meanwhile, are opposed to government proposals to loosen Italy's labor laws. They have vowed to paralyze the country with strikes if the government attempts to pass such measures.

Behind the country's stunted businesses lie the habits and fears of a long line of family entrepreneurs who cling to control of their companies late into life. Hemmed in by a thicket of regulation and legal restrictions, many of these families have learned to survive by doing business within networks of trusted customers and suppliers, rather than taking risks by dealing with outsiders . . . These firms have less propensity to innovate, engage less in research and development and rarely penetrate emerging markets," said Mario Draghi, ECB President and former Bank of Italy head, in a recent speech.

There is something beyond entrepreneurship. When the writer first arrived in Eastern Europe, he saw two very different entrepreneurs. And it is not difficult to figure out why he committed to assist one but not the other.

The bigger one had friends amongst a group of former communist rulers and was out to leverage the relationship and get into different businesses, having already acquired one. [And so the writer simply grins when he hears socialist-leaning Filipinos romanticize the purity of socialism.] But he wanted his first business sold to a Western MNC because he really did not understand the business; and was not prepared to spend time nurturing it. But he had hoped to make a killing – make hay while the sun shines, and get into other businesses. His connections were pointing him supposedly in the right directions – even when he did not understand the other businesses too! Fast-forward: the first business shrank to a mere shadow of its former self, and could not attract buyers – not MNCs, not locals. Not even the writer’s friends, who earlier considered it, would buy the business.

The smaller one, only a fraction of the business of the other, had the desire to grow the business. “Our country is small and we need to learn to do business in a bigger market, like the region.” (In the Philippines, our big population, on top of our parochial instincts, spoils us – i.e., we focus on the local market and don’t develop the wherewithal to compete in less friendly markets. And that’s not how Olympians are made!) But with a new found motivation following the collapse of communism, they wanted to dip into other businesses too. And the writer urged them to focus (in order to attain ‘nirvana’ a.k.a. competitive advantage) on two core businesses, one each for the two brothers. With that caveat, they made minor investments in other businesses. Fast-forward: with the global recession these other investments went south. But they now have two very much larger businesses; and these two – each is into several but related businesses – more than compensated for their bad bets.

The bottom line: there is something beyond entrepreneurship. And the writer’s friends are now committed to building an institution not a fiefdom. And they educated their children to respect the vision and its requisite values. In the 21st century, could they really afford otherwise knowing what nirvana is? But which tradition-bound – e.g., inward-looking, values family, monopoly and oligarchic power instead of technology and innovation power – Filipinos or Italians would struggle to accept?

Thursday, December 1, 2011

Of MNCs and economic analyses

It’s not surprising that the JFC (Joint Foreign Chambers) are the ones behind “Arangkada” – which spells out the vital few industries that can raise our economic output. Nor is it surprising if nationalists would not be enamored. “Here are these foreigners again, directing our economic downfall!” What is reality? These people are doing business in the region and are able to compare countries. If the country manager of an MNC in the Philippines is viewed by his or her regional office as being behind the peers from Thailand or Vietnam, for example, he or she would want the local environment to be competitive – like the Philippines fixing the power supply and cost issues, among others.

If the MNC has expansion plans, the Philippine country manager would want a fighting chance that the expansion would be in the Philippines. And, of course, they will invest in technology, innovation as well as talent, product and market development – the building blocks progressive MNCs are committed to given their drive to attain competitive advantage. An MNC can come from anywhere, not just the West – like the writer’s Eastern European friends. Just because we don’t know (how to be an MNC) makes them evil? Of course there is always a bad apple – even in a place where corruption is a way of life like ours? Our challenge is to learn (how to be an MNC) ASAP! Or we can choose to be out of sync with the rest of the world – remain an island unto ourselves, cling to hierarchy and oligarchy and the attendant massive poverty!

Industry impacts the economy directly – i.e., GDP is simply the aggregate output of the products and services generated by a country. If booming economies in the region are growing 8%-10%, for instance, and we are doing a slower 4%-5%, clearly we have work to do. (The reality would make us cry: “from 1960-2008 our neighbors did 3.6%-6.0% against our 1.4%,” Manila Standard, 17th Nov.) Yet posting and celebrating a high growth rate is empty when the building blocks that will sustain it are not present. And worse is when it makes us celebrate ‘a flash in the pan’ instead of focusing on problem-solving thus nation-building! Our unreliable and uncompetitive cost of electricity is not new – and our efforts to date are feeble and unacceptable, in this day and age, of competitiveness!

We need to focus on industrialization, and in producing truly competitive products and services that can be marketed beyond our shores. The more competitive they are, the greater our ability to overcome economic slumps. And which explains why MNCs strive to maintain a portfolio, not only of products, but of countries; and balance out their risks and opportunities. And the writer talks often about his Eastern European friends – supposedly amateurs compared to us in the free-market system – because they adopted the exact model: A few years ago, 100% of their revenues came from their local market; today it accounts for less than 50%, and will continue to come down by design – i.e., they’re not about rent-seeking monopoly and oligarchic power. And despite the economic slowdown in Europe, they continue to grow and step up investments in the building blocks of competitive advantage. And they’re not even in the high-tech industry. But they are not parochial either!

Our latest dismal export performance simply reflects our nagging deficiencies in infrastructure, and the imperative to develop and produce compelling and competitive products. Yet we can’t simply pursue infrastructure projects without a clear priority and focus. But ‘priority’ and ‘focus’ are not instinctive to us – i.e., crab mentality wins out? For example, we know that of the 86 airports around the country, 46 are white elephants. The JFC identified 7 big winners or industries that can generate $75 billion in investments and over $100 billion in incremental GDP. The key is to focus and prioritize the infrastructure projects that will support these strategic industries. It’s counterintuitive, to be inclusive starts with not being inclusive! And like the Pharisees and the scribes who struggled with the Greatest Commandments, our soft culture – which could be at the heart and why we’re progress-challenged – struggles with the phenomenon. And which explains why we’re anti-MNCs/foreigners, i.e., to prioritize and focus is second nature to them? In the vernacular, “mga suplado sila.” If true, we must be alarmed about our future!

To take our eye off the ball and proudly profess optimism is ‘bahala na’ or ‘que sera, sera’ all over again! Unfortunately, we assume it’s patriotism? We are decades behind the times – we need more than ‘a flash in the pan!’

Monday, November 28, 2011

Community sense

Is there in fact an industry out to discredit President Aquino? Whether people are out to discredit the president may not be the real problem of Juan de la Cruz. Our real problem is our lack of community sense?

Our efforts in power generation, for instance, must recognize regional if not global competition because we are competing for foreign investments at the front end and trade at the back end – beyond parochial issues that seem to consume us perpetually! Is the problem simply too big and we don’t have the capacity to solve it? But we would scramble to provide electricity if there is a rule that says: until we become supply- and price-competitive with our neighbors, no electricity will be supplied to all gated communities! And we’d surely call a national campaign? In the meantime, vested interests are celebrating because they have controlled the industry? Are we, as the writer’s Jesuit friend lamented, missing something, like authenticity? Or we simply don’t care? It is a microcosm of our failings or the state of denial we’re in! In Europe once dirt-poor Eastern Europeans couldn’t help give a dig to their neighbors: “4 hours work guaranteed plus 4 hours ouzo break!” “We’re Italians, don’t expect logic from us!” These people are simply blind to reality? What about us?

After President Diosdado Macapagal, with an exception or two, we lost the credibility of leadership and nationhood? (And the US is probably mirroring us – from Clinton on to Obama, Whitehouse leadership credibility has gone kaput!) Put another way, after President Macapagal, we have elevated two if not three amongst the most corrupt leaders of modern times! And their cohorts are still around – protecting their good names? How much more backward-looking do we want to be? We’re still in the “dark ages”!

Of course we have more billionaires today, yet poverty remains stark? What we proudly call our consumption-driven (essentially OFW-driven) economy – as opposed to an investment-driven economy – in fact sets up and strengthens the oligarchic character of our economy! We like to think we’re different from the more progressive-thinking, yet secular West? But are in the same boat? And now we worry that our schools don’t meet international standards – which means our road to the future is on a downward trajectory?

Which comes first, the chicken or the egg? We won’t be able to figure that out unless our starting point is a community sense? Vested interests behind the power industry (and the broader infrastructure industry) believe Juan de la Cruz in fact owes them a debt of gratitude? In the meantime, did the stakeholders behind tourism, one of our strategic industries, finally come together? We are our own worst enemy! Within industries we have pseudo-tsars flexing their muscles especially proud of past accomplishments – that we’re the economic basket case of the region?

What is reality? We are lagging behind our neighbors not just in the infrastructure basics, but more alarming is the stark absence of the building blocks of industrialization! Screams Business Mirror, 10th Nov: “Exports plunge 27.4% to 2-year low.” That is to be expected – i.e., our celebration of oligarchy is a celebration of backwardness manifested by our failure in power generation! And if our best business minds see crony capitalism simply as our way of doing business – “I’m in good company, I am no solitaire” – we are totally out of sync with the 21st century! It is the age of competitiveness, driven by technology- and innovation-focused investments! We can’t cling to “whom you know” – and must move on to “what you know!”

It would take a community sense if we are to move forward with dispatch – whether with NAIA 1 and NAIA 3, for instance; and if we are to indeed prioritize, implement and succeed in the pursuit of the strategic industries we have identified (e.g., ‘Arangkada’) and put us on the path to industrialization. It is heartening that DoTC secretary Roxas is talking about the imperative to prioritize!

Thursday, November 24, 2011

‘Creativity, leadership and problem solving skills’

The new World Bank report, Putting Higher Education to Work, says about the Philippines: “. . . [E]mployers and employees find . . . gaps [in the right skills] to be particularly severe in creativity, leadership and problem solving,” Manila Times, Random Jottings, 23rd Oct. The good news is we don’t have a monopoly of this problem. Progressive global enterprises have it in their crosshairs, and its constant fixing is part of the business. To develop an organization and its people and elevate their skills in creativity, leadership and problem-solving to world-class levels cost money. But it’s a must-do. For a business to be true to its role as a contributing member of society, it must be committed to the proposition that it is a sustainable, profitable enterprise! Yet it does not mean ‘rent-seeking’ oligarchy or inward-looking, underinvested uncompetitive enterprises out to make a fast-buck via “products” that insult Juan de la Cruz. It's the formula to sink a country like it did empires past, e.g., the Soviet’s. The good news is our furniture makers apparently have learned that to succeed in the global arena they have to move up the value-chain! Bravo!

It is encouraging to hear the views of the UST Rector: “. . . A sincere examination of conscience among our legislators” is called for, Manila Bulletin, 23rd Oct.Government funds allocated for [public universities] could have been better spent to improve basic education . . . Garbage in, garbage out . . . When I was a student in philosophy, one of my professors taught us the distinction between a product and a creation . . . A creation . . . is something that begins simple, even imperfect, and then evolves from simplicity to complexity, from imperfection to perfection . . . What we sorely need today is not the quest for perfection but for simplicity; not just the search for productivity but creativity . . . The government can lead the way towards this by being more creative in addressing problems in education.”

It appears the good rector is echoing the findings of the World Bank. “So why isn’t higher education fulfilling its potential? The main reason identified by the World Bank report is that higher education institutions have been managed as “disconnected” individual institutions. Governments have a fundamental role in making higher education work as a system where individual institutions are well connected among themselves and to firms, research institutions, and earlier levels of education.”

That is clearly easier said than done . . . unless we keep our nose on the grindstone – as one, not as disconnected parties! Even amongst the best in the private sector, they can’t simply raise their creativity, leadership and problem-solving skills – they work . . . and work . . . hard for it!

"I want them to meet this deadline, but at 31 hours from that deadline with 175,000 customers still out, I am skeptical," Malloy said of Connecticut Light and Power, noting that to meet the deadline the utility will have to restore power to affected customers at a rate of 5,500 residences per hour. [CNN, 5th Nov.] As a result, Malloy has directed CL&P to provide him by 10 a.m. Sunday with a town-by-town, hour-by-hour restoration schedule. They need to work through the night, they need to hold their crews, they need to have as many people as possible on the streets of Connecticut to meet that goal," Malloy said, adding that if by 10 a.m. Sunday the utility "knows it's not going to meet its goal, I want to know that . . . Malloy said earlier Saturday he is bringing in a consulting firm to do an immediate analysis of the power company's response, and legislative action is possible. Connecticut's attorney general has already called for regulators to investigate CL&P.”

Even the public sector can be hardnosed, committed to execution! Who will do what, why, when, where and how? Says President Aquino: “. . . Our administration, when we started, was bequeathed quite a whole set of problems, so much so that I won’t say that we’re the best experts—omniscient prognosticators of all of these problems—but it has given us a confidence in handling these problems to have an attitude that every problem presents an opportunity.” [Business Mirror, 5th Nov.] There is hope for Juan de la Cruz after all?

Sunday, November 20, 2011

A new day, not a perfect storm just typical bureaucracy

It’s delightful reading President Aquino’s interview with Business Mirror and Philippines Graphic, 5th Nov. “Renewed business confidence in the Philippines, Mr. Aquino said, is reflected in the re-investment of firms that had previously written off the Philippines as an investment site . . . And he is convinced that the Philippines won’t just have to dream of becoming a manufacturing country—by all indications, it can happen . . . The emerging markets of which the Philippines is a part of presents high growth rates for people who are looking for investments. So it behoves all of us to have that environment where we correct the so-called issues against us. So we welcome all of these investors who are looking for that safe haven. The problems elsewhere in the world can translate into opportunities for us and you can see that in so many fields.”

The writer remembers many years ago managers at General Electric seeing themselves as “too US-centric” – as they benchmarked with corporate friends wanting to internalize what being global meant. And the writer thought sitting in New York even for a month would turn one into “too US-centric.” And, of course, there is such a thing as corporate politics to contend with; so corporate-types aren’t exactly naive of the real world. The key is to strive for simplicity – the foundation of competitive advantage because it informs execution – by keeping people singing from the same hymnal because in the free market, failure is not an option! (And why New Yorkers had to ‘occupy Wall Street’; they wouldn’t put up with the chutzpah of greedy bankers who resisted regulations after being bailed out for their colossal failure. And the gall to brag about their smarts when Bear Sterns and Lehman, for example, were offered for a song through the kindness of the Fed – i.e., even bozos could generate profits under those terms!)

Indeed it is important for President Aquino to be confident and self-assured. And reading from the flow of his spiel, it is clear he wants to turn the tide and make us an investment haven. And even beyond that, to be a manufacturing country. Yet even MalacaƱang can’t escape the phenomenon of “too MalacaƱang-centric” especially given the reality of cordon sanitaire. And, of course, Philippine politics is much more severe than corporate politics and thus the challenge to get the rest of the country singing from the same hymnal is exponentially larger.

Should there then be the corresponding sanctions if administration managers don’t get the simplicity of the president’s game plan? For instance, we want to raise GDP by >$100 billion via a few vital industries, like tourism and mining to name just two. How discombobulated are these two strategic industries becoming to be? The good news is, after all the highfalutin rationale that froze us into inaction, we are finally doing something with NAIA 1 and NAIA 3. But is our issue with foreign airlines about losing 2 billion pesos in tax revenues or is it about protecting local airlines? Haven’t we been in protectionist-mode for decades which has cut us by the knees, i.e., foreign investors wouldn’t touch us with a ten-foot pole? We don’t want to keep sowing chaos and confusion – the breeding ground of influence peddling, oligarchy and thus corruption? Instead we want to seek simplicity? If a major enterprise cannot compete in the global marketplace, it has its rightful place? Where is Pan American or TWA? In the private sector, failure is not an option – one either sinks or swims? Thus behest loans that are written off by our government financial institutions are worse than the bank bail outs in the West – i.e., they still had to pay them down? What about electricity so basic for an economic activity and heightened development? What about the escalating conflicts surrounding mining regulations?

Beyond simplicity is leadership – and even in a hierarchical structure, the key is ‘to sell’ the game plan, not simply to impose one’s will, which could just be ignored in a democracy! The object remains: to get buy-in and alignment!

Hopefully, the administration is ushering a new day. And that what we are witnessing is typical bureaucracy, not a perfect storm?

Friday, November 18, 2011

Of comfort zones and paradigms

People including foreigners respect the caliber of the leadership in our private sector – despite all the unfavorable news about our economy and beyond – given our history and decades of experience. And it is not surprising since we were supposed to lead Asia into the new century; and the decision to make Manila the HQ of ADB was a confirmation of that belief by the international community.

Indeed the private sector has its core of progressive enterprises. Unfortunately, the rest of the economy hasn’t matched the progress achieved by our neighbors . . . . And so our economic managers proudly unveiled PPP in order to accelerate infrastructure development. And the JFC, working with both the public and the private sectors, developed ‘Arangkada’ to get us on the road to industrialization by focusing on a few vital industries like tourism. Sadly, before it even got off the ground it conflicted with another initiative, to raise the efficiency of our tax collections! (Confusing 300 tenets from the Greatest Commandments like the Pharisees?) And so foreign airlines are staying away; and given our high electricity costs, exporters are also thinking of leaving! And they are on top of our avocation of taunting (if not milking, as one columnist described it?) foreign investments – and we wonder why we only get a pittance? And unwittingly we’re coddling ‘rent-seeking’ oligarchy believing we’re patriots – and wonder why a third of us are hungry? A system that is underinvested cannot generate wealth for 100 million Filipinos – especially when investment is controlled by a handful! It is no different from the time of the tsars! And we’re walking around proud of tradition?

Home” – our comfort zone – is where we can let our hair down and prop our feet up? Hopefully the house isn’t burning? We’ve stuck with our comfort zone for decades; and with the 21st century now a reality, it appears we’ve recognized the world has dramatically changed! What to do? We reinvent the wheel? Unfortunately, our ‘default menu’ may be ‘factory set’ and we appear unable to override it! And so the solutions we come up with have a common thread: inward-looking and, sadly, feeble. Our compassion (or “awa”) wouldn’t take radical surgery even if it was the prognosis – yet we grew up with an abundance of parables? Compassion stops where ‘crab mentality’ begins? If Brazil and Mexico with per capita incomes several times ours still needed CCT, how do we expect ‘farm to market’ roads, for instance, to be the prognosis for our underdeveloped economy?

Which also explains why we struggle with interventions sometimes demanded by institution-building like restructuring – i.e., we personalize the downsides because of compassion. But a leg has to be cut to save a life! Unsurprisingly, our institutions are weak – and thus despite our smarts we can’t build a nation? And we’re entertaining initiatives akin to import substitutions that stunted our manufacturing like they did our economy? The only way we can compete and thrive in a globalized economy is to invest and leverage the investment via technology, innovation, education and talent development as well as product and market development. And that’s done by partnering with the outside world not locking them out. There is no free lunch!

Yet even contract manufacturing, for example, does not have to be one-way, from the West to the East! The writer’s Eastern European friends signed up a Western enterprise to manufacture for them! An enterprise from an ex-communist state just out of the dark ages is the principal, not the hired hands! They are about competitiveness, not ‘rent-seeking’ meant to thrive in crony capitalism and its safety net, political patronage. Simply put, they must sustain profitable growth if they are to carry on their contribution to their economy thus the common good. And it means investing in product development and in technology via product sourcing, in this particular case.

We can talk ‘paradigm shift’ but now must walk it? When the writer covered the region, the only place where he heard ‘paradigm shift’ was in the Philippines, but it was in the neighbors where he saw it! Unfortunately, the world will not change the rules to fit our comfort zone! Nor is it about reinventing the wheel; it is about leveraging what an interconnected world has to offer. It is not about being steeped in tradition; it is about challenging an unfortunate present and creating a better future. We can’t be too heavily laden and weary to formulate a contemporaneous worldview – we have to keep the faith!

Monday, November 14, 2011

To romanticize is not to problem-solve

To problem-solve demands execution which is hardnosed: Who will do, what, why, when, where and how? Indeed we must promote tourism, being a strategic industry. But we have to in short order learn to raise our expectations – we’re in a downward spiral, which if not yet obvious is glaring if we simply look outward? But it is heartening that we are addressing the need for a word-class airport and the infrastructure network to support tourism and, as importantly, our broader industrialization needs?

But the real question is: how hardnosed are we? Poverty will keep staring us in the eye until we learn to stare reality in the eye? To romanticize is not to problem-solve? Thus, we must be able to pose the question to ourselves: Does our economy need fixing? If it does, who will do what, why, when, where and how? That demands loads of leadership! Unfortunately, we instinctively lead with our heart and thus get quite romantic? There is nothing wrong with romanticism – passion is synonymous to great achievements! Yet, problem-solving is fundamentally hardnosed?

Of course we value a high minimum wage? Of course we value our OFWs? Of course we value patrimony? They are great examples of how we romanticize instead of problem-solve? We should have valued skilled work, industrialization, and investments and competitiveness? And it is one of the reasons why we’re not comfortable with foreign investments especially from the West – they’re too hardnosed, not romanticists? But that’s how higher education in the New World was founded by the Christians from the Old World, via the select-few Ivy League institutions – i.e., imbued with academic rigor? And so many of us put our children behind those ivied walls? And when they return home, we look up to them too? But that’s because they occupy some higher tier in our social hierarchy (not unlike in the US.) And given our hierarchical culture, we romanticize them too?

Yet, problem-solving is hardnosed? Two Nobel laureates were behind the implosion of the once sterling hedge fund, LTCM? To be hardnosed is to ask the tough questions no matter who the players are and how high they are in the hierarchy? The Catholic hierarchy in the US is paying a heavy price for taking it for granted!

Does our economy need fixing? If it does, who will do what, why, when, where and how? And we can’t be half-hearted, we must leapfrog! Who will leapfrog the what – i.e., our anemic investment levels, antiquated technology, outdated innovation, plummeting education and talent development, outmoded product and market development pursuits? Why? We can’t even put body and soul together for Juan de la Cruz! When? Like yesterday! Where? Prioritize, e.g., critical basic infrastructure and vital few industries! (To prioritize goes against our grain of inclusion and compassion?) How? Don’t shut the rest of the world out – and nurture oligarchy, which is why we’re still in the dark ages! Peter the Great at least invited the best Europe had to offer to modernize his country? And CSR can’t be our best shot; it is simply insulting and at best condescending! The indios are good in livelihood projects – only?

Our 10-million strong OFWs bring $20+/- billion to our economy. Now we expect them to bring 10 million tourists too? We have a problem with our tourism program like we have a problem with our economy? We are an underdeveloped economy driven by OFW remittances – thus a natural haven for oligarchy, i.e., free money is coming without the imperative of competing in the global arena! We call it ’Filipino abilidad’ when it’s unmistakably cacique in character, confining us to the dark ages! What athlete will skip global competition and expect to be and win in the Olympics? In the meantime, we defer to hierarchy and celebrate oligarchy, wickedly trapping us in a vicious cycle! Unsurprisingly, we have become an object of charity, i.e., international financial institutions see us as CCT-dependent!

It is the 21st century and even countries that were once pariahs are zooming past us? Our response ought to be strong enough for the rest of the world to view us as an investment destination, beyond tourism! That we can build a world-class airport and critical basic infrastructure – and as importantly, that we can pursue the vital few industries (i.e., overcome ‘crab mentality’) that will put us on the road to industrialization! We don’t live in trees anymore!

Saturday, November 12, 2011

An institution not a fiefdom

The worldview of Juan de la Cruz values hierarchy, ‘inclusion and compassion’ and above all is family first? The writer’s Eastern European friends came from the dark ages – the repressive Soviet rule! But they’re self-deprecating: “The new subway system is up in two years; it will leapfrog us 20 years, which means we’d still be 80 years behind!”

I am asking the older daughter to help me sell to the younger one the benefits of being disciplined especially with schoolwork.” The writer’s friend is sharing that he just took away the laptop and the iPhone from his 14-year old – to give her a lesson for doing less than she did the previous term. Instead he got her an ergonomic chair – to sell her the idea that her priority lies elsewhere, i.e., in her schoolwork. And so he was delighted when the girl said that without her laptop and iPhone, once she gets home, she is able to straightaway do her homework.

I don’t want them to simply follow my footsteps. I want them to pursue what would make them happy so that they’d have the passion for it. And so she’s taking Spanish, now that she knows English. And my brother and I agreed that we should not position our children to run an operating company within the group. They could be involved with the holding company, and as a family we could structure our investments as much as we like. But we must leave the operating companies to the professionals, who must be motivated and not worry about competition from family.”

The day has come! The brother’s older daughter completed her Harvard MBA and is now in the process of understanding the holding company. And the freshly minted HBS grad (with investment banking under her belt) sits down with the writer. “Whatever little I know about industry, as you know, I picked up in the West. I am a stranger in my own country and in our own company. But I agree we are building an institution not a fiefdom.” Time flies. The writer still remembers when she had first approached, to review the curriculum vitae she was putting together: “I hope to get an internship in a good outfit either in New York or London.” She was attending the university at Bath in the UK. The scenario could be straight out of Connecticut (where George W. Bush grew up, and attended Yale and Harvard.) How did they learn about modernity so fast, so soon?

The writer wondered how he would ‘sell’ – as opposed to impose – a lesson to a 14-year old! Would he have the heart to take away her laptop and iPhone? Why would they not simply give the plum job to a family member who’s a Harvard graduate – i.e., we personalize before we professionalize? And unwittingly we undermine transparency, if not engender corruption? What does that mean for our brand of democracy? We don’t get the best answers because we’re ruled by hierarchy? The writer’s Eastern European friends recognize that until their culture is able to breed a Mark Zuckerberg or a Bill Gates or a Steve Jobs or a Larry Page and Sergey Brin, they’d still be closer to their socialist and dark communist roots than the 21st century!

Until we learn to respect a 14-year old? Until we respect reward and discipline? Until our institutions learn that they have the obligation ‘to sell’, not simply impose their will, we would be closer to the dark ages? And so radical groups are emboldened to be critical of our establishment? Unfortunately, they unwittingly romanticize socialism yet Deng Xiaoping isn’t their model – whose radicalism was to embrace market economy? He practically begged the West to bring money and technology to China? He knew the harsh realities a closed, socialist economy brought to them? Yet our nationalists hyperventilate whenever they hear the word foreign? There is nothing more important to them than to put that pot of soil under lock and key? The church ought ‘to sell the parable better?’

Should we then remember Deng Xiaoping when dealing with the US, for example? Also, technology has leapfrogged less advanced countries to ably compete against Uncle Sam, e.g., Singapore is ranked higher in competitiveness? And globalization has exposed their vulnerabilities, their cost structure and their greed? That should enrich our formulation instead of blaming everyone and his uncle why we’re an economic basket case? We must grow up!

Tuesday, November 8, 2011

Of white elephants

Roxas uncovers 46 white elephants,” Manila Bulletin, 19th Oct. Our airport issues keep piling: from the downgraded airport to the worst airport to 46 white elephants across the country! Not surprising given our ‘inclusive-compassionate’ mantra – which, unfortunately, has equated to ‘crab mentality’? Instead of prioritizing and pursuing sustainable initiatives, we spread scarce resources thinly and miss their benefits altogether – a formula for sub-optimization and inefficiency, and over the decades poverty? With due respect to an economist: Brazil and Mexico’s GDP per person – at PPP of $10,800 and $13,900, respectively, versus our $3,500 – is why their poverty picture is better, not CCT per se!

While representations from the public and the private sectors worked with the JFC (Joint Foreign Chambers) to develop an industrialization road map – i.e., ‘Arangkada’ – some of us are still railing against mining, against capitalism, against globalization, against what-have-you? That’s fine so long as we don’t seek perfection (not even the prelates are perfect?) and be reduced to inaction and rendered helpless? We grew up with the Great Commandments and the Parable of the Talents and know about focusing on what matters and optimizing yields from our God-given resources?

Efficiency is what we want in tax collection. But efficiency doesn’t mean undermining a strategic industry like tourism, where we expect elevated revenues, assuming we do our homework and execute accordingly – i.e., put the right pieces and infrastructure in place? Fundamental in competitiveness is benchmarking – i.e., do our neighbors have the tax problem that we have with foreign airlines? Taxation is the job of Congress – and so we have the LEDAC, to align the initiatives of the executive and the legislative branches?

As an underdeveloped economy our primary goal is to raise our total output, and that means our GDP. Unfortunately, we don’t have the track record. Which puts us too close to the trees (tax receipts) and thus miss the forest (GDP)? Indeed we must push efficiency in driving our total output, e.g., like low-tax rate Singapore? And ‘Arangkada’ spells out the vital few industries that will deliver the biggest bang for the buck: investments of $75 billion, incremental GDP of >$100 billion and lots of jobs over a decade. Raising our GDP by such magnitude will raise our tax receipts!

Of course it will not happen tomorrow, but a third of Filipinos have been wallowing in poverty for decades! We simply have to step up to the plate! “What are the five products you want to focus on? Get rid of the rest, because they’re dragging you down,” Steve Jobs says to Larry Page, Bloomberg, 22nd Oct. “Sharpen the company’s focus . . .” Until we’re truly globally competitive engaged in daily blocking and tackling that will be Greek to us – and mired in counterproductive efforts? And until we step up to the plate and learn the ropes, poverty will stare us in the eye!

In the meantime we’re enjoying the sideshows mirroring Hollywood’s celebrity culture? E-mails a friend from Manila: “Do you want easy money? Our government financial institutions can lend money in a flash, not for development purposes – to unload their own equity holding at a spread, and proudly so; and conveniently dodge ‘luto sa sariling mantika’ – and you can turnaround (for an even wider spread like the middlemen who benefited from land reform as opposed to the farmers?) and ensure a friendly party gains controlling interest of a publicly-traded company – and where all the parties involved sit in its board?

But given our “informal” (big boys) culture Juan de la Cruz sees it as ludicrous (adding insult to injury!) that sitting in the same board should be taken (hook, line and sinker) as an arms-length scenario? Of course, legal niceties could render a different verdict – and prove once again that Juan de la Cruz is simply too smart for his own good? And explains why the world ranks us poorly in ease of doing business or attracting foreign investments? Who cares – it’s what patrimony is about, like protecting our tax code or favorite oligarchs?

We ought to invite George Clooney to turn us into a hit Hollywood movie? Pixar would be an alternative? Or Saturday Night Live? It’d be an insult if it were a zarzuela!”

Friday, November 4, 2011

“Not in my generation . . .”

That’s probably what Rizal thought too, and so he was hopeful the youth was going to be the future of the Philippines? The wife and 3 Filipino friends, after traveling together, had the sense that the country wouldn’t get fixed in this generation? And it is not for lack of trying? As a Jesuit friend (May he rest in peace!) would lament: ”Juan de la Cruz has to internalize authenticity – to be ‘plastic’ is not authentic?”Don’t judge a book by its cover!’ But we like to present the beauty that is the Filipino, as Imelda would stress. And unsurprisingly, our priority in tourism is a new slogan? (While Mahathir decades ago had as his focus and priority building the Malaysian road network. It was reminiscent of Eisenhower, educated by the autobahn as a soldier! And so the writer would remind his Eastern European friends: “We can’t be running around like a headless chicken competing with these global behemoths!”) And thus we’re proud of our hospitality, our deference to hierarchy and beyond? And we would put our guests in our own bedrooms, offer them to partake of our humble meals – and we do it from the kindness of our hearts?

The problem is when the guest has a standing in society – like a politician or a government official – we effectively set up a conflict of interest? And we can’t get a grip on corruption because its genesis is positive? And when a guest does not respond according to our expectations, we conclude they are insensitive – no ‘debt of gratitude?’ And our expectations rise even higher when it comes to outsiders or foreigners? We expected the Americans to demonstrate greater sensitivity – and when they didn’t, they’d be ‘ugly Americans?’ But they are imperfect; as are the Japanese or Chinese or even Europeans and whoever, and thus would always be ugly? And it would explain why we’re less welcoming of foreign investments than our neighbors?

At 100 million Pinoys, we are a big market and should have a robust economy? But not when our GDP per person is a mere fraction of our neighbors’ and even once deprived satellites of the Soviet empire? We have now accepted the need for stronger institutions – to create a stronger base to build a strong economy and nation? Thus it is encouraging that President Aquino is personally carrying the fight against corruption? (Still, the government has to deliver – e.g., how could we drive a complex initiative like the PPP when we can’t resolve a tax issue with foreign airlines, for example, and when tourism is supposed to be a strategic industry?) And we have other institutions too, like the church and the school? Institutions are made up of humans, and in our case it’s Juan de la Cruz! Wherever it came from we have set very low, if not narrow, expectations for ourselves? (In the vernacular, ‘mababaw ang kaligayahan?’)

Writes the Rector of UST, Education Blues, Manila Bulletin, 16th Oct: “. . . I felt the need to overhaul my vocabulary. The latest educational jargon . . . is now mostly derived from economics, business, and information technology. And these point towards the new directions for higher education . . . it is subject to market forces and, just like any other commodity, comes with a price . . . Given the fast pace of obsolescence of technological tools, schools are forced to spend millions to acquire the latest and the best software and hardware, to keep abreast with the competition . . . Schools are gauged in terms of their functional, not fundamental relevance, to society . . . without regard for a solid humanistic foundation . . .”

Progressive (as opposed to greedy) global enterprises are educated on the confluence of economics, theology and ethics, e.g., “Why Lonergan’s Economics,” Stephen Martin, Assistant Professor, Religious Studies Department, Seton Hall University, 2006 Nov. These companies comprehend the role of education, and as importantly, recognize the responsibility of business. They are committed and heavily invested in education and talent development, knowing full well that in a globalized, highly competitive economy, investment must come in concert with technology, innovation, education and talent development as well as product and market development.

Is the challenge for our institutions then to develop in Juan de la Cruz a “solid humanistic foundation?” But that cannot happen by ‘being an island unto ourselves,’ especially when it perpetuates a cacique system and structure? And having a disproportionate number of entrepreneurs isn’t the answer either – if we’re starved of teachers, priests, nuns, artists, policemen and women, doctors, scientists, among others? And we can’t keep putting the onus on the youth?

Monday, October 31, 2011

“This facility can’t be efficient!”

The word facility can be substituted with product – or brand, office, subsidiary, company, branch, agency, bureau, department, government, country, economy, etc. – and it will still hold? The writer’s Eastern European friend is proudly talking about the group’s latest venture and how the manufacturing manager reacted to a facility (“This facility can’t be efficient!”) that they considered for acquisition but did not.

But he’s real proud because it is the third new business and is already doing comparatively much better than the previous one, already a success story by itself. There are at least two things the businesses have in common: (a) consumer packaged-goods and (b) efficiency. And efficiency has become instinctive to the people (and the organization) that it is a competitive advantage! Ergo: even a simple business could go beyond local if it is competitive! “We were victims of repressive rule. Free market and globalization opened the door for us but we needed help to understand how to leverage investment. I had to sell my dilapidated car realizing investment was the first step.” Since then they’ve experienced the power of technology, innovation, education and talent development as well as product and market development.

The friend reminds the writer that when the latter first visited, the remark that dropped their jaws was: “We need to mechanize the packing lines as a first step to raise efficiency.” The focus on margins (a clear-cut measure of efficiency) has become an obsession! And they have elevated the game . . . to driving margins via volume, value, and profitability founded on a disciplined and rigorous approach to product development and innovation. But they had to struggle: Europeans (indeed generate more ideas than Americans but the latter are ahead in commercialization) have had the sense that they’re a creative and artistic bunch, and the focus on discipline and rigor would cramp their style if not undermine their creativity. (Everyone would think “I’m a Steve Jobs?”) And so they would lapse into proudly showing off lovely new product ideas. But when tested through the rigor and discipline of product architecture modeling, for instance, it becomes obvious the idea could not travel beyond the home market – i.e., it does not deliver a compelling (human) higher value-added proposition!

Substituting facility with Philippines or Philippine economy, the title of the blog reads: “This economy can’t be efficient!” And why does it matter? Global companies are truly obsessed with efficiency – which is how they are able to raise their competitiveness, and elevate it into a competitive advantage. And nations that are able to attract foreign investments better than others have one thing in common: they are perceived as efficient economies! For example, the US – despite its economic woes – is still the nation that attracts the most in foreign investments. But we could be in better shape if we turn underdevelopment on its head – i.e., we have lots of room for growth unlike the US, which is fully developed! Thus, the US needs ‘stimulus’ money. BUT we need to focus on development, i.e., not piecemeal but building blocks toward, say, our critical basic infrastructure or vital few industries, e.g., ‘Arangkada’.

If the Philippine economy is to be efficient, we have our work cut out for us? We need the Aquino administration’s flagship PPP initiative to take-off? We need to reverse declining exports; prevent insurgents’ attacks on mining installations – i.e., edify Juan de la Cruz about the net positives of the industry; overcome delays and overpayments of major projects; be a preferred nation for major infrastructure projects – e.g., canceling projects like Laguna Lake, Ro-Ro, NAIA 3, rightly or wrongly, undermine our efforts to be perceived as an efficient economy? And we have to be unstuck from an economy driven by oligarchy and monopoly power? Power is closer to man’s animal instinct, not his intellect – as Clinton rued how a supposedly intelligent man could succumb to a Monica? And it applies to corruption too?

Clearly we have ways to go? Those who have elevated efficiency into a competitive advantage have moved the challenge down to their gut – starting in their head, dropping it to their heart and settling in their gut or to the level of their instinct? Simply put, it is above and beyond rhetoric, ideology, debate and ‘kuro-kuro’ and as importantly, way past being frozen to inaction?

Thursday, October 27, 2011

Thank God it’s Friday

It’s actually a Monday morning but two news items from the Philippines carried the positive feelings that Fridays bring over to the new week, as the writer sits for his morning coffee. “The COMSTE (Congressional Commission on Science, Technology, and Engineering) is promoting a new, radical model for higher education – one that is heavily centered on R&D and innovation,” Manila Bulletin, 9th Oct. “This new model is called the innovation clusters, tripartite partnerships on R&D among the academe, private sector, and government . . . While we do have several outstanding universities, they stand out as islands of excellence in an ocean of mediocrity. We have to change that if we are to truly harness the potential of our people . . . Efforts at reducing poverty and improving governance will not result in progress unless we leapfrog development itself,” says Sen. Angara.

It appears the Agriculture road map is beginning to take shape; and the department’s budget is being raised by 60%? Earlier reports were discouraging, lagging behind the efforts of other strategic industries? “The AF 2025 February report indicated that a priority goal for rice and corn is an improvement of good governance, increased public and private investments, and technology development,” Manila Bulletin, 10th Oct. ”Fisheries is the top promising sector being eyed by AF 2025 to help lift the entire agriculture industry with the goal of making the Philippines a seafood basket and aquamarine center of the region . . . The interventions needed to achieve this include opening up of Pacific and China sea fishing area, mechanization . . ., technician training, community organization of fishers, implementation of fish cage . . ., establishment of fish processing centers in fish production sites, and construction of docking area (cold storage facilities for small fishers).”

Finally we are setting high expectations for Juan de la Cruz! We’re not just the little brown brother! We’re not just good to partake of the spoils from a cacique system via livelihood projects! We’re not just to take the condescension and insults from a lopsided economy that has descended into la-la land? The czars and the emperors were condescending – but they’re not of the 21st century? And for a nation that was to lead Asia to be a maturing, modernizing society, we can’t settle for the crumbs? How do we rectify decades that we’d rather forget? ”Efforts at reducing poverty and improving governance will not result in progress unless we leapfrog development itself . . . To help lift the entire agriculture industry [our goal is to make] the Philippines a seafood basket and aquamarine center of the region.”

Senator Angara and the Department of Agriculture need Juan de la Cruz to move the country forward? It is encouraging that “The new model [from COMSTE] is called the innovation clusters, tripartite partnerships on R&D among the academe, private sector, and government.” But beyond that, we must not be an island unto ourselves? We can’t be chanting ‘patrimony’ oblivious to the reality that our neighbors are able to leverage? And the church can’t afford to make Marx’s dig a truism, that ‘religion is the opium of the poor’? Rizal made a similar point? For instance, given the reality of ‘scarcity of resources,’ ‘to be inclusive’ is rhetoric – ‘to prioritize’ is how to make things happen? Simply put, we need to learn to say ‘no’ – so we could prioritize?

Juan de la Cruz needs to recognize that there is a world beyond patrimony and livelihood and charitable efforts? Lifting the country and helping the poor can only be sustainable in a sound economy? It is noteworthy that our think-tanks are now teeing up why we don’t seem to be committed to investment? And thus it follows we’re not predisposed to technology and innovation? As the wife would say, “we don’t have to go very far, my siblings’ jaws would drop whenever investment is on the table.” And that is despite growing up with the parable of the talents? But we’re happy to ‘live on interests’ – or LOI, off the family heirloom?

Thank God it’s Friday, and people like Senator Angara and the Department of Agriculture are forging on!

Sunday, October 23, 2011

Beyond investments and competitiveness . . .

. . . And . . . corruption . . . we must challenge ourselves about our . . . problem-solving and execution, like the way ex-NEDA secretary Dr Sixto Rojas did? To paraphrase him: ‘it is not the absence or lack of consistency of economic plans that has made us economic laggards . . . we need new thinking?’ We were the gold standard in economic planning such that our neighbors would simply ‘copy and paste’ our plans?

It is a well-informed and sophisticated Filipino that foreigners see in Juan de la Cruz – and why many have made it abroad. But it won’t be surprising if Filipino expatriates say that our worldview does not necessarily match those of developed economies? For instance, Gibo Teodoro was viewed by the business and foreign communities as an ideal leader. In an interview he expressed that perhaps it was his instincts that they sensed from his message and his responses. And which he thought came from his overseas experience – where success was a pretty intense process. And in the inelegant lingo of corporate America, for example, it means ‘daily blocking and tackling.’ (How it reminds the writer of Charlie Badion!) And it is for the same reason that we believe Mar Roxas is an ideal right-hand man for President Aquino?

One columnist calls it our ‘pusong mamon?’ Our instinct is to lead with our heart – and thus ‘inclusion and compassion’ is what Juan de la Cruz is about? A Filipino scholar whose concentration was in ‘culture management’ would stress though that . . . ‘if we’re meant to lead with our heart, it would be situated where our head it, perched above our shoulders?’

Socialism is meant to be inclusive and compassionate. Yet after 8 years in the writer’s second home, he has not heard that it is what the young people want. In fairness, the older folks would prefer the ‘good old days’ when they had their share of the community’s jobs or farms or basic necessities – from bread to vegetables, etc. But as the world now knows, Deng Xiaoping went against the grain and embraced market economy?

The writer is still awed by the length and breadth of Ukraine’s wheat farms, yet the system failed. The lack of bread caused riots across the region – i.e., low-pricing may be enticing yet proved violent. Today, people wonder why the communist leadership put up an aluminum plant and a truck factory (read as inefficient!) in their town, among many other examples, when the source of raw materials and target markets were ill-defined – i.e., job creation per se was unsustainable. And Putin doesn’t seem to have learned, still banking on oil, while behaving like a modern-day czar? But has Juan de la Cruz learned his lesson? We don’t want to lionize oligarchy – i.e., livelihood efforts would characterize a cacique structure more than an egalitarian society, which is driven by sound economic fundamentals?

A market economy demands loads of problem-solving and execution, and investments and competitiveness? It is a fundamental given yet not instinctive to Juan de la Cruz? We valued a high minimum wage – except that as the ILO says, we missed to value skilled labor? (And the converse is: we value slack, precisely why our elders warned us to guard against Juan Tamad?) We valued the OFW phenomenon giving jobs to millions – except that as we now know, we missed to value industrialization? We valued patrimony – except that as we now know, we missed to value investments and competitiveness, i.e., the Asian tigers and China and India have been getting a disproportionate share of technology, innovation, education and talent development as well as product and market development?

The human ego can go haywire (Maslow) and seek higher needs instead of building up from a strong foundation? (The Soviets sought the lofty aims of an arms race while failing to build the fundamentals of its economy?) And in our case that means: a world-class airport, electricity, infrastructure or simply roads to our biggest revenue-generating tourist attractions to begin with (i.e., prioritize!), and the strategic industries spelled out in ‘Arangkada’? Arangkada is a straightforward road map to push industrialization via a vital few industries that will deliver the biggest bang (i.e., prioritize!) for the buck, i.e., $75 billion in investments and lots of jobs over a decade, and incremental GDP of >$100 billion. What do we need to get there? To remember . . . that our heart is not perched above our shoulders?