Wednesday, September 21, 2011

An adolescent economy

An underdeveloped economy we shall be if we can’t overcome our ‘handicapping system’? It was called ‘import substitution’ before? On the same day we are trumpeting a 10-spot bump in our competitiveness rating, we are again into an inward-looking mode? Our local investors have access to capital but are handicapped by our underdeveloped manufacturing capacity – and thus must be protected? How do we sustain such an effort?

George W. Bush never wanted to let go his training wheels – and got what he wished for, Cheney?

Investment and competitiveness are two sides of the same coin? We shall be unable to truly ramp up our competitiveness rating – and leverage the world beyond ours – if we continue to nurture an adolescent economy? The Western world knew that despite the fall of the Berlin Wall, people would remain hostage to underdevelopment if they weren’t shown how to attract investments and, as importantly, compete. The writer was drawn to an underdog, Eastern Europe, because of the challenge faced by a couple of countries: they wanted to get into the EU and needed to step up to the onslaught of competition from the West. Of course they stumbled; and EU had to withhold infrastructure funds after audits revealed that corruption had reared its ugly head, for example.

The writer’s Eastern European friend is going through his ‘15 minutes of fame’ – responding to why he must be the 2011 Europe’s entrepreneur of the year, among 10 finalists: The fall of communism gave them choices – to paddle their own canoe – and he made the choice to be in the business he pursued. But to succeed was not a matter of choice – it was the values he learned from his parents that gave him the inner strength to be a David in a sea of Goliaths. His mother was critical when in one subject he missed the equivalent of an ‘A’ rating. And with a wide grin, he says: “My younger daughter was very angry at herself when she missed the equivalent of an ‘A’ rating, and so my wife and I tried to console her – but she would not have any of it.”

It was not easy for these people to simply embrace the imperatives of investment and competitiveness. The friend would explain: “I thought I knew what brand management was – which was why I chose to be in the business. Now I know that my knowledge was miniscule. I did not understand the power of margins – it took me 10 years to be able to employ it as a competitive advantage; and I am still learning.”

They once proudly thought that local engineers could cobble together local parts and fabricate a production line. Today, with 4 different businesses and marketing in over 20 countries, their manufacturing facilities are state-of-the-art; and those proud moments are now just memories – but fond memories. They have chosen to move on, and forward. Like an MNC, they have optimized their portfolio (of products and countries) which, on balance, gives them robust annual growth, overriding the economic cycles of the different countries. (It is something we don’t appreciate: we have yet to optimize our export-product portfolio via higher valued-added, competitive products. For example, our electronics exports, i.e., semiconductors, are not competitive finished products and thus dependent on the growth – but dragged down by declines – of the broader industry. Our neighbors would only be thrilled that we can readily find excuses not to be in competition with them? Yet our folks taught us to guard against ‘Juan Tamad’ – e.g., we ought to rank ahead most other countries in competitiveness?)

Our neighbors did not wish for a Dick Cheney . . . and simply let their training wheels go? The writer is amazed reading about China – how much confidence they’ve gained over the years. And hopefully they would share the spoils with us, following the visit of President Aquino. The writer spent years doing business in China: Folks from the West had to hold their hands and showed them the ropes. If there was one thing they never demonstrated, it was being parochial. They were hard bargainers but understood what a ‘win-win’ negotiation was about; and thus were able to draw as much investments from the West, which they put to good use – raising the bar, and raising their competitiveness to world-class levels.

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