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!’

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