Tuesday, May 29, 2012

Be at the top of value chain

Companies that don’t change get left behind. Since I became CEO [in 1995], 87 percent of the companies in the Fortune 500 are off the list. What that says is that companies that don’t reinvent themselves will be left behind. I also think that’s true of people. And I think it’s true of countries.” [Cisco's John Chambers speaking to Charlie Rose, 19th Apr 2012, Bloomberg Businessweek]

That is how tough the world has become; and the challenge to “reinvent” applies to countries too. There is no free lunch; we must seek to be at the top of the value chain. And it means our perspective and mindset must first switch to proactive – like our neighbors demonstrated. Unfortunately, the two key drivers of our economy – OFW remittances and BPOs – are reflective of a reactive character. And indeed Juan de la Cruz faces a big challenge especially as the other supposedly strong elements of the economy – our half a dozen dominant business entities – in fact demonstrate a narrow as opposed to a broad-based economy and thus haven't turned us into a competitive economy. Ergo: the Philippine brand of economics is clearly at odds with today's 21st century realities.

Recognizing the enormity of the challenge, many of us worry about: (a) poverty and (b) the soundness of the free-market system – especially because of Western greed that brought about the collapse of the world’s financial system and thus the Great Recession. But wait a minute haven’t our neighbors demonstrated the ability to rebound and rebound quick – simply because their economic fundamentals make them more competitive than we are?

And we also know that the Soviet Empire failed in the basic promise of socialism? China, in contrast, has aggressively pursued investment and technology – which are at the heart of what competitiveness is about and why China was able to move up the value chain. It is likewise seeking state-of-the-art arms technology from the West – clearly to elevate them to superpower status, and be a counterweight to the US. [Although China’s issue re lack of transparency will continue to dog them.] As they say in Washington, gridlock is good – no single party can lord it over. For example, the world has realized how bad unbridled Western initiatives, like financial engineering, cum greed could be – i.e., the world has to suffer for the vanity of Wall Street. And it appears the CEO of JPMorgan is yet to shed it. Except that it doesn’t change the reality for us. We must still raise ourselves up as an economy.

And if Deng Xiaoping boiled down the "vital few" imperatives of an economy into “investment and technology” – thinking like a capitalist – how come we seem to struggle? Is it because we’re blindsided by the fog of the "trivial many"? Not even socialism had a 100%, absolute solution. The key is to seek “the greater good for the greater number,” recognizing that the exception has to be addressed as such! 'Absolute' in a universe, as statistics will tell us, is a fallacy. And precisely why the principle of democracy is so defined? But does it explain why we are unable to execute especially major initiatives – because we don’t have the conviction that the outcome would be absolute and inclusive? But even among the twelve was Judas? Or are we socialists at heart? We can’t confuse the narrow benefits under a cacique environment to that a broad-based, value-creating and competitive economy – as country after country in the region has demonstrated!

If we are to move up the value chain, for starters, we need to get basic and strategic infrastructure projects done, and done fast. But it appears we are dragging our feet, reports Business Mirror, 2nd May 2012. The upgrading of airport facilities, a project targeted for completion February 2007 is now moved to June 2013! Why are we shooting ourselves again in the foot – and this time undermining tourism, which is supposedly a strategic industry?

We cannot wipe poverty overnight – it has no 100%, absolute solution! The reality is it will take over a generation (even at a constant 7% GDP annual growth rate) for the Philippines to be a developed nation. But we have to start somewhere – for the benefit of those following us or our generation would be synonymous to the Failed Generation. 

No comments:

Post a Comment