Thursday, March 29, 2012

The Chairman and CEO of Ayala speaks up

Companies are the entities that create national wealth and so their productivity, efficiency, and dynamism are central to country competitiveness. An economy cannot be competitive unless companies operating within it are competitive and productive.” [The Manila Times, 11th Mar 2012]

There is no single policy or grand step to achieve competitiveness. It comes from a series of many improvements across all sectors, over long periods of time. Everything matters in improving country competitiveness—education, infrastructure, efficient capital markets, workforce quality, social and political environments . . . But clearly, one sector cannot do it without the other moving in step. It is for this reason that we all have to work together in the public and private sectors to truly improve country competitiveness. We are equal sides to the equation.”

Being the oldest and most successful local conglomerate, it is indeed welcome news that Ayala is stepping up to the challenge of country competitiveness. It brings to mind the US conglomerate, GE, who in the early 90s invited industry friends – who were acknowledged global players generating greater revenues overseas than their domestic US businesses – to speak before their managers. GE was very upfront: “We are a US-centric company. [Left unsaid was: even if we’re bigger than our industry friends.] And so we want to hear from them.” [And the writer remembers a question from a Brit who was the new GE country manager for a South Asian country: “How important is relationship in Asia”?]

GE has since aggressively reinvented itself and is today acknowledged as a major global player, establishing regional and technology hubs around the world. What can we learn from the GE experience? To be competitive the Philippines will have to start somewhere. For instance, we must decide that we will in fact be globally competitive. In one word, we have to learn to be proactive.

It is good to analyze why we’re uncompetitive yet we must be proactive – and not be held back by linear thinking. For example, international agencies have confirmed (the body of knowledge) that manufacturing is critical for an economy especially when the technology and innovation it generates yield a greater multiplier effect (from the investment.) The good news is we have Universal Robina and Liwayay Marketing demonstrating their prowess even beyond our shores; and we need more of them! If they are our ‘best practice’ models our task is to rapidly replicate their efforts. We have to address our sinking rankings in higher education but it doesn’t follow that the private sector must wait. Universal Robina and Liwayway Marketing did not have to wait.

Back to GE: while a conglomerate, it is committed to market leadership, i.e., its nirvana is sustainable profitable growth. And GE defines that by being in businesses where they are either number one or two globally. And that is another lesson for us – i.e., the first lesson is to pursue manufacturing and the second is to be globally competitive. Ergo: we have to unlearn the assumption that competitiveness is strictly defined by local dominance. To be locally dominant per se is synonymous to parochialism and short-sightedness, especially when it mirrors our cacique structure – i.e., singularly valuing capital and missing the 21st century imperatives of technology and innovation.

In sum, we must decide and want to be globally competitive. And that means to be committed to investments at competitive levels; and that the investment will be geared to the acquisition of technology, such that innovation becomes a natural outcome; we must be committed to talent development that is measured by the skill to develop competitive products, and the ability to develop markets beyond our shores.

With that capability in short supply, we must leverage what the global market has to offer. We must overcome parochialism and short-term thinking. We must stop hiding behind fancy words like sovereignty, nationalism and patriotism – when they perpetuate a charade, a nation of haves and have-nots. To be globally competitive is a tangible undertaking: who will do what, why, when, where and how? There is always the first time to step up to the plate.

Saturday, March 24, 2012

The Philippine Economy and the Need to Reinvent Ourselves

By Romeo O. Encarnacion
In 2009 I started a blog and the title reflected what I thought was what we needed to do if we are to ever lift the Philippines up as an economy: “Philippine economy: Reinventing ourselves.” I chose the blog to be anonymous because I wanted to encourage Filipinos to feel free to reject or accept my thoughts. And if they do buy them or just some of them, they could freely build on them because my goal was simply to offer a different perspective – being a Filipino looking in.

Change is never easy nor is human nature simply expected to change. But having done business globally since 1986, I have seen with my own eyes how people could be encouraged to make a firm commitment to change. I owe it to being a Filipino that my American employer tapped me for a regional (Asia-Pacific) and then a global role. In the same manner that the international community in 1966 chose Manila to be the headquarters of the Asian Development Bank, my bosses similarly respected the worldview of Juan de la Cruz – not surprising since we were next only to Japan as a progressive economy.

But what happened? “From 1960-2008 [or almost haft a century] our neighbors [grew their economies] and did 3.6%-6.0% against our 1.4%,” Manila Standard Today, 17th Nov 2011, quoting former NEDA chief, Cielito Habito. “There has been a tremendous uniformity in policy and strategy since 1962. In other words there has been tremendous consistency, tremendous continuity from 1962 to now. Now, at the end of that period, we are now worse off than we were. We are now less industrialized than we were in 1985, we’ve been selling textile equipment as scrap,” Dr. Sixto K. Rojas said. “So my advice is, Dondon (NEDA and Socioeconomic Planning Secretary Dr. Cayetano W. Paderanga Jr.), if the program looks familiar, discard it, it’s been tried, it failed. Look for the unfamiliar.” (Business Mirror, 28th Nov 2010)

Our economic struggle isn’t new, and given what the rest of the world has done over the last 50 years or so, my advocacy, starting with my blog, is meant to raise that point while sharing my worldview. And so I have worked with a couple of Filipino companies to share with them how they could expand their horizon beyond our shores. (Is our inward-looking bias consistent with our parochial instincts?) And Dean Ricardo A. Lim of the Asian Institute of Management encouraged me to turn my blog postings into a book. It is currently in the works c/o with the working title, “Learning to Reinvent Ourselves.” While I am thankful to Dean Lim, I am also grateful to the 50 or so Philippine newspaper columnists that I have been religiously following for seven years, and have effectively engaged in my blog. Their writings have forced me to expand my thinking.

I’ve spent the nine years since retirement from an MNC as a business consultant in Eastern Europe, first at the instance of USAID/IESC. But after my month-long engagement, my Bulgarian friends asked me to stay on. As I wrote in my blog: The writer extended his engagement sensing that they were sincere in their desire “to create their new world": they were (a) committed to be a ‘white business'; (b) seeking help to turn their ‘dream’ into a plan – that must be executed with discipline and hard work; and (c) recognized they could trip if not in fact stumble and wanted their attention called whenever they did – “because we may not even realize we are messing things up.”

I share that to point out how people who were under Soviet rule for decades and had little understanding of free enterprise and the market economy would be so predisposed to change. But that could be the difference with us Filipinos – we did not suffer under such rule? But we have suffered with our economy?

The model I have been sharing – a result of over 25 years of global business experience, on top of 20 years in the Philippines – is that the 21st century, being an integrated world, demands competition. It’s nothing earthshaking really but it is consistent with the fundamentals of economics: the scarcity of resources and the ever-changing want of man. And over the three years that I’ve been doing my blog, my sense is we Filipinos are yet to be unanimous on something as fundamental as that.

It is not surprising if many of us don’t buy globalization in the first place. Yet it is not unusual if we own an iPhone or an iPad if not even other Apple products? We love to travel. We are knowledgeable of developments across the globe. But we still want barriers to protect us from the outside world? We continue to invoke that we’re a small poor country that must be given a chance to learn the ropes. And that is where we appear different from the rest of the world. It was during the 10-year period when I was a regional manager in Asia Pacific that our neighbors embraced market economy like never before – including China, which was supposedly a socialist nation.

But as we continue to invoke the necessity to be a closed economy, oligarchy has remained the pillar of our industry. Our cacique orientation remains strong – i.e., that capital is the be all and end all. And so we admire, though grudgingly, Filipinos with access to capital. What we have missed is that in a globalized world, competitiveness demands more than capital – i.e., technology and innovation as well as talent, product and market development.

But the restrictive economic provisions of our Constitution have encouraged oligarchy to further flourish beyond their expertise; and so the same half-a-dozen are dominating across several industries especially basic infrastructure-related, which is just a shade removed from rent-seeking. But in the absence of technology and innovation, for example, despite their size, these major Philippine enterprises have not made us globally competitive. Says a friend, “Do you know that I have just changed Internet providers and I am still angry?” Adds another, “Beyond problem Internet providers, mobile service is characterized by dropped calls!”

Even our professionals benefit from this restrictive environment but at the expense of all of us – as we set very low expectations, and thus explains why we’re not truly geared to be globally competitive, For example, as Senator Angara has noted, our lawyers have been shielded from competition; and so how could we sharpen our legal profession – and elevate its contributions to society – if we are isolated as such?

Vietnam has done a better job in engaging with the global community and thus in attracting foreign investments, and not surprisingly, they are developing at a much faster pace. Likewise, we sorely need technology – but we don’t have to reinvent the wheel, so to speak. While innovation is equated to discontinuity or pure value-creation, it could also be value-addition or building on the state-of-the-art. For instance, Apple does not invent every element of its products – e.g., they used Toshiba’s coin-sized hard drive for the iPod and Corning’s tiger glass, being scratch-proof, for their touch screen technology – which they similarly acquired, and not developed in-house.

And thus beyond capital or investment, competitiveness demands innovation especially in product development. Over the last nine years, I have worked with my Eastern European friends precisely on innovation and product development. So much so that from one single business – household and personal care products – they have moved into hygiene and disposable tissue, snack food and dairy food. (And in 2011, the European Business Awards recognized them as one of Europe’s 110-best, after vetting 15,000 enterprises.) None is high-technology, which simply means that innovation in product development is universal and not confined or unique to hi-tech products.

Thus I have shared with a Filipino consultancy and a BPO enterprise how even in the service business, the concept of “product architecture” could provide the mental model to pursue product development. The key is to understand the thought process inherent in “value-addition” if not “value-creation,” of which Steve Jobs was a master. Simply put, the product architecture must move up from offering “basic” benefits to “self-actualized” benefits. It is consistent with the ever-changing wants of man, captured succinctly by Maslow’s principle on the hierarchy of human needs. For instance, to be self-actualized could mean the product would respond to a person’s lifestyle – and which is why the iPad has become indispensable. From the moment we wake up and until we retire at night we unconsciously want the iPad next to us. Not surprisingly, Mark Zuckerberg wants Facebook to be the “first thing we go to in the morning and the last thing we go to at night.”

And beyond investment, technology, innovation and product development, competitiveness demands talent and market development. In short, to create a culture of innovation, an enterprise or a nation needs the right kind of education – i.e., inquisitive and expansive. And in the case of businesses, to educate the consumer or the market about the benefits of their products – not only with regard to an individual’s lifestyle, but also to their impact in making efficiency and productivity a way of life, thus elevating Philippine global competitiveness.

And so competitiveness is embracing investment, technology and innovation as well as talent, product and market development.

There are two developments that are indeed welcome news: (a) President Aquino’s personal leadership in the fight against corruption; its being endemic has made Filipinos indifferent thus making our moral fabric suspect; and (b) “Arangkada Philippines 2010”: A Business Perspective’ from the JFC (Joint Foreign Chambers). “[It] contains measures on how to realize the projected $75-billion foreign direct investments and 10 million jobs in the next 10 years from seven priority industries.” They will generate incremental GDP of over $100 billion, and do highlight the fundamental building blocks of an economy: power generation and basic infrastructure as well as the priority industries where the Philippines could be competitive. At the end of the day, our per capita income of $3,500 is barely a tenth that of developed economies.

The bottom line: to grow several times fold and be a developed nation requires a major structural fix. And relying on consumption principally generated by OFW (overseas Filipino workers) remittances (of as much as $20 billion annually) has not gotten us – and will not get us – to where we ought to be. Instead we can call upon the human spirit and begin to look forward and dream and see ourselves as a developed nation! We have to overcome simply being in survival mode, which is reflected even in our driving convention and thus in our chaotic, dreadful and nightmarish Metro Manila traffic! Rizal must have lost faith in his generation that he called on the youth to be the future of the nation. Have we likewise lost faith in this generation? The reality is it would take more than a generation to fix our economy, but we owe it to the future to invest and erect its building blocks – and take the pain that comes with it.

For example, we must get our act together instead of championing the status quo in power generation. We have to cease taking inaction as the best option. That was the same argument we had when we said that to industrialize was too costly – because we wanted to go it alone instead of attracting foreign investments. And thus 50 years hence we remain underdeveloped. Will that happen again with power generation? If it does, would we finally recognize the curse of parochialism and shortsightedness?

Juan de la Cruz can’t just be averse to change, unwittingly nurturing oligarchy in the midst of poverty? We have to learn to be egalitarian instead of perpetuating hierarchy? It would be unfortunate if we underestimate the impact of our preference for hierarchy and the high value we put to it – because it is a very plausible explanation for why we tolerate inefficiency and substandard conditions for many but not for ourselves?

Romeo O. Encarnacion is a business consultant who has focused on Eastern Europe over the last nine years. His client in Bulgaria, a consumer-products maker, was chosen by the European Business Awards in 2011 as among Europe’s best from the 15,000 companies vetted for the selection. He started his career in 1968 as a human resources trainee in the Philippines. He then joined a Fortune 500 company in 1981, working with its Manila subsidiary for seven years. He later moved up to its Asian regional headquarters and finally assumed a global responsibility for the company. Since his Eastern European engagement, he has likewise done consulting work with some domestic enterprises in the Philippines. In 2009 he started a blog, “Philippine Economy: Reinventing Ourselves,” owing to his desire to share his worldview with his fellow Filipinos. He considers himself very hands on and professes a strong bias for simplicity and successful execution. He lives in Stamford, Connecticut with his wife Belinda.

Thursday, March 22, 2012

Intuition and loss-aversion

Intuition (or in the vernacular 'pakiramdam') and 'loss-aversion' are instincts that people take for granted? How do they match the 21st century reality of an interconnected world – which has spurred competition and thus innovation? The writer appreciates that Juan de la Cruz is at home with his intuition. His Eastern European friends in many respects manifest it too. And both attribute their inherent creativity to their intuitiveness.

"How was your first week back?" That's from one of the business unit managers that the writer bumped into as he was waiting for the lift [they use the British word] as the workweek ended. People see the writer 'wandering around' especially when he had just been away. After decades in large organizations the writer has learned that 'the test of the pudding is in the eating.' And so after chatting with the head honcho his agenda is always to test the pudding: does the organization satisfy the 'straight-line rule.' ‘The shortest distance between two points is a straight line’ – yet organizations violate this simple rule all the time, i.e., what the boss is saying must be reflected in what the people are doing!

And it’s not only in the Philippines, but because of intuition or 'pakiramdam' execution does not match the thinking at the top. And so a Pinoy manager would say, "I know what the boss is saying but I have to be sensitive to the reality in our work setting. And it explains why the Philippines is uncompetitive – and why President Aquino's "daang matuwid" (or straight path) remains elusive? The status quo is always powerful and a manager may not be prepared to tell his people why things must be done differently. The status quo represents stability and thus the thought of creating instability is perceived as a potential loss, and should be avoided. And loss-aversion comes in many forms. In short, we let our intuition to matter-of-factly take precedent over the ‘common good’ – and it explains why the world has left us behind?

It is our parochial and short-term needs that we value most – thus our history of short-sightedness? Unfortunately, nation-building presupposes that people would come together to establish a vision that they would subscribe to – and accordingly join hands to get them there? Whether it is the challenge of import-substitution or investing in power generation, our motivation is to insist on the parochial and the short-term? For example, our parochial and short-term needs said that we must ban the Chinoys from retailing; but who controls the retail industry today? The world moves on and forward; and which is what progress is all about. And thus a people must learn that the parochial and the short-term are a formula for short-sightedness. Unfortunately for Juan de la Cruz, the 21st century has crystallized and sharpened the reality of progress – and it is an interconnected world, driven by competitiveness and innovation!

And so the writer responds just before the lift opens: “I am truly delighted; confidence across all the business units is palpable.” The writer knew what was going to welcome him; the company’s intranet monitors daily sales and the running margin numbers. And that over the first couple of months the 2012 target was being delivered with lots of surplus to spare – just in case the global economy would prove a challenge this year. And the writer has heard from everyone: “We are going through the budget year with our eyes open because we did our prep work pretty thoroughly; but which as you know took us time to recognize as an imperative. Our investment in product development and innovation has become visible not only to the trade but to the consumers as well – and it is across the region. And the further away we market, the more our assumption is being confirmed: that only premium brands with truly healthy margins would give us the firepower to compete at the aggressive levels like we do in the home market.”

These are ex-socialists speaking to the writer. They went through their own struggles yet today are simply committed to the common good, not their intuition or parochial and short-term interests. They keep driving towards the future – because they have defined their ‘nirvana’ as being truly way out into the future, thus avoiding short-sightedness.

Sunday, March 18, 2012

Back to reality

The writer's reentry to reality – after having dodged a big piece of winter while in the Philippines – came sooner than he wanted. Because while filed in the back of his mind is that Mar Roxas is on top of the renovation of NAIA 1, the reality of the here-and-now hit him. How could we have tolerated this terminal building all this time? Thankfully a smiling immigration officer politely inquired if the writer enjoyed his holiday. It really is more fun in the Philippines. And it would be 42 degrees (F) when he gets home in Connecticut.

The writer typically cuts his Philippine homecoming sooner than he likes because he wants his tax organizer done and with the accountants before they are overwhelmed by everybody else's. But he had to put the stuff aside to read an email from the daughter: "Palawan was beautiful. Really stunning. I don't even care that the facilities [outside the resort] were substandard. [In reference to friends' comments who had gone earlier.] It will keep the place inaccessible and unspoiled. It still feels very natural. It's the anti-Boracay. If this were Italy or France, it would already be overrun and crowded like Capri and St. Tropez. Palawan is still paradise."

And over dinner with American and Filipino friends the writer googles 'club paradise palawan' and proudly showed photos of the island resort, after reading out the daughter's email. Immediately some pulled out their calendars and penciled in plans to visit Palawan. And one intoned: "We love the country but let's be honest, if the Mexicans can have civilized facilities, why can't we"? (The tendency to be resigned if not fatalistic given our many challenges should be overcome by the human spirit which is not defeatist? And it has been demonstrated by a war-torn Vietnam, former Soviet satellites that had emerged from the "dark ages" and even China – and why there is a Chinatown in practically every country?)

Was the reality of our tourism efforts effectively summarized by this dinner group? We will attract tourists but there is always a ‘but’ when it comes to the Philippines? As the wife would reflect, it is our "medya-medya" (or half-baked) mentality. We can’t seem to commit 100% on most things. There is always something missing or short – because to compromise [or ‘palusot’] seems second nature and/or because of compassion we're spreading ourselves too thin. And at the end of the day we have very little to show. While, unfortunately, creating gaps and loopholes that breed corruption? Because we struggle to focus and prioritize, our ability to execute is then put at risk. 'Defeatist, unfocused, can’t execute'? We don’t want that to be the definition of the Philippine brand?

And then the group asked the writer how much progress the country really is making. But even before he could respond, someone jumped in: “You know, we are caught in this vicious cycle and so we are simply reacting to what is in front of us. What we need to attain is a virtuous cycle.” And the writer would explain: Unfortunately, we will be a nation of haves and have-nots for the simple reason that we won't truly be an open economy – one characterized by competition and that means investors from wherever would bet on us (like they do in Singapore or Hong Kong) and throw in capital that buys technology and innovation. Why? We never “had it so good,” and as behavioral economists have quantified and figured out, loss-aversion overpowers potential gains.

And more precisely, human nature will not want the apple cart disturbed, especially when the spoils are coming the way of the powerful few. It's the sad consequence of our parochial and shortsighted worldview. And since the public sector is not characterized by transparency, it is not surprising that a lawmaker (re bank secrecy thus setting ourselves up to be punished by the community of nations) would claim: "We're protecting ourselves – and throwing the book or version of a pathetic ‘rule of law’ – and not some foreign interests”! Totally forgetting that even the secretive Swiss banks had to bow to Germany’s tax-evasion scandal in the spirit of truth; that we owe it to the future to create a better Philippines, one synonymous to transparency, for the next generation and beyond!

[The writer wishes to thank CJ Artemio Panganiban for educating us non-lawyers re the Corona impeachment trial.]

Tuesday, March 13, 2012

“Suplado” versus “Sabog”

It's human nature to want to belong; and so that if harmony is the group’s convention, we expect everyone to conform? But what if there are expatriates and we see them as 'task-oriented’ instead of ‘people-oriented’? Do we label them "suplado" (loosely translates to insensitive)?

Sabog’ (loosely translates to 'being all over the place') is an expression that the writer heard a lot while with friends recently. This husband and wife team needed assistance in pulling their thoughts together – “we’re entrepreneurs and there is a constant stream of ideas that we simply feel like pursuing but it has dawned on us that many a times we were chasing rainbows.” But they were not the only ones. Another friend was explaining a very similar realization within the family business.

Would 'sabog' in fact explain why decades of efforts to drive the Philippine economy proved short-sighted – because we were all over the place, and thus missed the 'vital few'? Finally the Joint Foreign Chambers are showing us how not to be ‘sabog’ through 'Arangkada'? For example, the JFC teed up 7 industry winners that would generate over $75 billion in foreign direct investments and incremental GDP of over $100 billion, and millions of jobs over 10 years. But until we learn to try something foreign we would invariably fall for the familiar? Unfortunately, the familiar explains why we're economic laggards – i.e., simply, our ways haven't worked? For example, garments, semiconductors and even OFW remittances – and including our handful of billionaires – did not generate the dynamic to raise us from underdevelopment!

We can't measure everything by our convention, especially given that we're uncompetitive and have a problem with governance especially corruption, among others? And more tangibly, to exploit the avenues presented by the JFC and pursue the strategic industries they identified, we need a couple of predicates: power generation and basic infrastructure. But we're 'sabog' and can't focus on the building blocks for progress and the common good? And so we instead compare our miseries re unemployment and competitiveness, for instance, with the US? Should we in fact ask ourselves why we can't match the progress of our neighbors?

And in our wretchedness we need to seek some breathing space – and thank God our ‘green efforts’ have started to bear fruit reflected in our higher green index rating! But that’s not the Black Swan that will change the dynamic of our economy! Because the dynamic we seek must truly be rational, i.e., from the interplay of these imperatives: investment, technology and innovation and talent, product and market development! The concept of dynamic does not come naturally when we are wearing our ‘linear-thinking’ hat. But it comes alive when we are wearing our ‘lateral-thinking’ hat.

To think laterally means thinking outside the box. For example, master innovators like Steve Jobs 'start with the end in view.' How? With product ideas that will approximate the consumer’s quest for self-actualization – i.e., respond to her lifestyle, including but not limited to making her truly efficient and productive. Conversely, linear thinking would ask, 'what's the first step to get this project started'? Marcos, for instance, initiated several industrialization-directed projects, but what was 'the end in view'? As Lee Kuan Yew would reminisce in his book describing the evolution of Singapore, "the press conference to announce the activity was what Marcos saw as important, not the end point." Ergo: Development is not about the activity but the desired outcome!

Can Juan de la Cruz learn to be 'suplado'? All it means is to be focused in the pursuit of the common good, and not to be 'sabog' so that we don't drown in the trivial many and miss the vital few! In short, we need to ask ourselves, what is 'the end in view'? We must be a developed nation, raise our average income several times fold! And the JFC is showing us how to get there! If a war-torn Vietnam could attract over 30% (of their GDP) in FDIs, against our less than 20%, and thus are developing at a faster pace, there must be something right they are doing? Unfortunately, we're still preoccupied justifying our failings, which only makes us more 'sabog'?

Saturday, March 10, 2012

Erring on the side of ‘rational’

Global competitiveness is simply what it says; and that means we in the Philippines must set our sights higher because the rest of the world is not asleep. And thus, while we must indulge our ‘intuitive perceptions’ – that our efforts are finally moving us forward – we have to in short order develop the bias for erring on the side of ‘rational perceptions.’ For a nation digging out of a hole it demands greater, and more purposeful efforts; our individual success stories notwithstanding – i .e., to Juan de la Cruz they're intangible!

Here is a sampling of the news the world reads: PHL ranks high in green index (Philippine Star, 20th Feb); There is a need to increase technological development in the Philippines and exploit it for the country’s progress (Manila Standard Today, 20th Feb); The yield and export of the world’s famous Manila mango has been dwindling over the years in tandem with other Philippines agricultural products (Manila Bulletin, 20th Feb); An appeal was aired Sunday . . . for President Benigno S. Aquino III to look into the power shortage that has resulted in regular and massive brownouts in the South (Manila Bulletin, 19th Feb); Three of the top business organizations in the country . . . have opted to keep quiet on, and appear indifferent to, this [Corona impeachment] gripping national issue (Philippine Daily Inquirer, 17th Feb); The WSJ report accused Kasuo Okada of paying $110,000 to Philippine government regulators. Okada is formerly a close ally of Steve Wynn, of Wynn Resorts Ltd, and is deemed as "unsuitable" based on an internal investigation, and Wynn is forcibly redeeming his shares in the company (Fox Business, 19th Feb.)

The progress in our ‘green’ efforts is indeed welcome news – yet it’s not for us to rest on our laurels! For example, our industry hasn’t invested in technology at globally competitive levels – and rightly so because it is easier to win in our protected market and thus we’re not truly keen to be global players? Unfortunately the consequence is our underdeveloped economy! And thus it is not surprising that we aren’t investing for the long-term in agriculture, not even on our world famous Manila mango? And why would we invest in power or energy for the short- and the long-term? And our top business organizations have opted to be quiet and appear indifferent to a gripping national issue? And courtesy of our regulators, we've been dragged into a high-profile corruption case. And should we then wonder, given that only a fraction has been expended on our military modernization program, and given how the PMA alumni association has ostracized one of their own involved in military budget disbursements, how much more corruption would there be with the announced step-up in military modernization?

It’s a pity. Those who are altruistic won’t stand a chance to overcome the cancer in our society? But we have to keep at it because as Ninoy Aquino professed, the Philippines is worth dying for? Asks Archbishop Luis Antonio Tagle, reports the Vatican Insider Online, 16th February: “Where did we fail? What is happening to our catechesis? What is happening to Catholic education? Are we able to form consciences? How come that many of them are products of Catholic schools but when they get into the political system, and government service, service disappears and becomes self-serving? What has happened to the formation of conscience?”

Have we become the virtual ‘Juan Tamad,’ if not worse, that our forebears had feared? Can we call on the human spirit to show us the common good and how to pursue it? The Joint Foreign Chamber went through a rational exercise and developed Arangkada for us – to address the underlying weakness of our economy, i.e., the crying need to attract a meaningful chunk of foreign direct investments. On the other hand, we have yet to demonstrate that we can get our act together re power generation and basic infrastructure, and throw our unequivocal support behind the JFC’s identified strategic industries. But on the sidelines we are proud that investors are interested. To be proud is not enough; we have to act, not just feel good that they are interested. We must look at the future and be dogged in creating it and not be distracted by the past – which we have to get over, whether it’s culture or history or whatever.

And it boils down to discipline once again – especially when vested interests can overpower the common good? Unfortunately, as the wife noted, discipline escapes us because we shelter and pamper our kids? And probably why the writer’s maternal grandfather – May he rest in peace! – had frequently spoken about the backbone of Juan de la Cruz?

Wednesday, March 7, 2012

Culture management

The Asian countries referenced below can represent the ‘before and after’ model of progressive undertakings. They are proud of their cultures and expect foreigners to respect them. But do they in fact recognize that there is ‘the common good’ in every undertaking – be it a nation or an enterprise? In Eastern Europe, to introduce a ‘teambuilding program,’ the writer had to bring it down to the heart of the business: ‘what are we here for?’ And he would stress that “we are no longer a local company – we are a global company and we have to give and take culture-wise!” “As the psychologist Jerome S. Bruner has observed, cultures do offer us templates, but even the simplest culture offers a variety of choices; culture does not determine us.” [Gish Jen, NY Times, 17th Feb]

The writer remembers his first trip to Thailand: the local HR person introduced him to an American who was the acknowledged expert in educating expatriates in the local culture. And in Malaysia, he was presented to a group of local businessmen while playing golf after hours. Malaysians love the game so much they would play even at night – with the golf course lit simulating daytime, but not exactly. And at the Royal Selangor Golf Club, the writer was initiated to the classic ‘nasi goring,’ becoming teary-eyed notwithstanding the intensely cold beer. Next was a South Indian cuisine, which meant using bare hands, eating lots of rice and spicy dishes on banana leaves. And then the night market, similar to Singapore’s. India was an altogether different experience – the Indian competing if not besting the Filipino in complex thinking?

But China would prove the most challenging – negotiating in a socialist-communist environment on top of the local culture made it truly daunting. But the writer had to trust his instincts while conscious of the fundamental rule, ‘everything is relationship.’ And that meant accepting that time is a negotiating tool, i.e., his American company cannot dictate the pace of the negotiations – but even major issues are resolved once relationships are established. And today still etched in the writer’s mind is how horrified he was when he first set foot on this Chinese facility. But how proud he would be when the joint-venture surpassed all performance standards – becoming truly world-class – after the partnership went on stream . . . having invested in technology and state-of-the-art facility, and innovation, and in talent, product and market development.

Compassion is as much a part of our culture and unsurprisingly we embrace one of the fundamental principles of Christianity, “The preferential option for the poor.” And our faith constantly reminds us of the question, ‘what are we here for?’ And so full of good intentions, we championed having the highest minimum wage in the region, celebrated overseas employment for 10 million OFWs, and advocated livelihood projects especially at the lowest levels, etc. But where are we? Simply, until we recognize the reality or the imperative of optimizing returns from our God-given resources and are focused on what will get us there, we are in fact living in ‘la-la land’?

And the challenge is magnified in a globalized and highly competitive economy. For example, China has its own dilemma following its ascent to being the second largest economy – and that is, to move from the ‘comparative advantage’ of low-labor cost to the ‘competitive advantage’ of innovation and higher value-creation (which the US also faces in a more profound way.) We must thus shift our mindset to the pursuit of ‘competitive advantage’ – which comes from investment, technology and innovation and talent, product and market development. They are the same imperatives foreign investors evaluate as they do their due diligence. And so the keenest investors could be turned off if we can't get our act together – better than we’ve demonstrated to date with NAIA 1&3, the PPP, power generation, mining, the auto industry, Northrail, declining agriculture output, etc. Absent a track record we must thus work doubly hard if we are to erase the laggard label. Because the algorithm like gravity will pull us down – as those who do and deliver, not just analyze, sales forecasts will attest.

Yet our neighbors were not determined by their cultures – and the past – and so Juan de la Cruz can't just be looking backward? And as even the writer's Western European friends would share, there is such a thing as creating the future – and thus we have our job cut out for us!

Saturday, March 3, 2012

Beyond intuition reason lies

To be fair, there are many positive things that we do; and for many years we’ve talked about our gray economy and our hardworking OFWs. And between them we proudly claimed that unlike our ‘export-dependent’ neighbors, we “performed better” in the face of the global recession. As Nobel laureate Daniel Kahneman postulates in his book, ‘Thinking, fast and slow,’ perceptions like those are what he labels as ‘intuitive’ – as opposed to seriously considered ones which he describes as ‘rational.’ And the writer has talked about ‘the vital few’ (e.g., the Great Commandment and Pareto’s 80-20 rule) which has an inverse, ‘the trivial many.’

Since “it is more fun in the Philippines,” let’s go intuitive – and more on rational later. Just before the writer and wife’s periodic homecoming, the son-in-law was animatedly talking about Anthony Bourdain’s visit to the Philippines in 2008 that he saw on TV. And so the daughter, who was traveling to Bangkok, came to Manila and made lunch arrangements at ‘Bale Dutong’ (in Angeles), encouraged by how profusely Bourdain praised Claude Tayag’s (Filipino) cooking. The trek to Angeles and the almost 3-hour lunch (or degustation) was worth every bit of it. Mary Ann was in her elements and was as able in her commentaries – and quite entertaining – as her husband was with his cooking. Delight was in the faces of family and relatives alike; and the writer intoned that the marvelous experience could only be matched by his week in a French hotel in Africa, and where the chef ensured that guests would return because of how they were pampered. (Claude will represent the Philippines in the Memphis Festival in May via his culinary skills, with other aspects of Philippine culture that will be featured as well.)

On the same day, and with good reason to be fashionably late, the family also attended the engagement of a relative. And the pleasant surprise was that the bride-to-be, a lawyer who graduated from Ateneo, chose to pursue poverty-alleviation instead of a lucrative legal career. As the daughter quipped, “let’s leave it to our husbands to do the money-making.” She herself had left Wall Street after 8 years to be a volunteer teacher in a Manhattan charter school. And the writer, for his part, felt quite optimistic as a couple of friends shared how keen they were to pursue global competitiveness. And there were other news and stories – big and small – which gave a sense of comfort about our future.

The demand to be rational in problem-solving, however, can’t be swept under the carpet. The writer and wife were introduced to PF Chang’s in White Plains, New York many years ago, and it has become one of their favorites. Unfortunately, visiting the Alabang Town Center, they couldn’t believe that in what was once a parking area stood PF Chang’s. Tolerating such insult to injury reflects a lack of global competitive sense? We can't trumpet social responsibility while undermining our environment and thus our future – i.e., ‘impunity’ can apply beyond corruption in government? Writes David L. Balangue, “. . . The opinions [of the top minds in corporate Philippines] matter in that they can be more objective, unlike some radio, TV and newspaper commentators and reporters who are obviously paid lackeys,” Philippine Daily Inquirer, 17th Feb. On the other hand, what is Taiwan advertising? "Once [in]famous for its high levels of pollution, Kaoshiung has reinvented itself . . . the city center is now clean, modern, and it's bright spots exude an atmosphere that is fresh and youthful.”

And we all agree that “it’s more fun in the Philippines!” But try traveling between NAIA 1 and Resorts World, just a stone’s throw away. Sensible traffic management will enhance our environment thus global competitiveness! And so people couldn’t help notice how clueless a couple of cops were flagging vehicles along C-5 just before exiting towards White Plains, when they had turned a long stretch of the road into a virtual parking lot! And the Alabang-Zapote road remains a nightmare; not to mention Edsa – with the MRT barely a decent human option?

Competitiveness demands pragmatism, on top of our efforts to address our global comparative ratings. And rationality, beyond intuition that lifts our spirits, demands that we focus on the vital few – e.g., power generation, basic infrastructure and a handful of competitive strategic industries – because the “trivial many” (or our 'tingi' mentality) will only truly matter if these building blocks of the economy are in place and generating far greater economic output.