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!’

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