Wednesday, August 29, 2012

Ecosystem: supply and value chain

PIDS, a state-run think tank, has noted that while we've had foreign direct investments (FDIs) for decades, we have missed the crucial ecosystem because of our failure to develop intermediate industries and thus have remained dependent on imports; and, consequently, are unable to attain the requisite productivity and much less develop higher valued-added products in the electronics and auto industries, for example. [Business Mirror, 24th Jul 2012]

Writes Ka Iking Señeres, Manila Times, 2nd Aug, 2012: “For so many decades now, we have heard the same mantra that we need irrigation, farm to market roads and financing in order to succeed in agricultural production. It is similar to another mantra that we need more classrooms, more teachers and more textbooks in order to succeed in public education . . . but still, there was no remarkable success in agricultural productivity . . .”

9/11 brought to the free world the challenge of 'connecting the dots,' which in reality is inherent in complex undertakings. And the Japanese had learned it as a tool in TQM or total quality management, which emphasized the techniques of process mapping – something the writer’s Eastern European friends struggled to internalize. (They’re artistic and creative and would fall in love with how they designed and created packs, for instance. But they had to learn the object of the exercise: to get a competitive product out to the market, specifically on the shelf of the retailer; and that the consumer would in fact buy it – which is the endpoint of the process. But it starts with developing a concept that would precisely deliver that outcome – i.e., it is imperative to define its inherent parameters beforehand, against which the product is to be developed.) In industrialization connecting the dots is akin to developing industry clusters or complementing and/or intermediate industries to support a major industry. The point being interdependence cannot be taken for granted if an industry, and the broader economy, is to attain optimal productivity and be competitive.

When we view agriculture as agribusiness the process would indeed be more extensive than what we may assume. For example, in Eastern Europe they realized that raising livestock (e.g., cow, sheep and goat) is merely a component of the process with the endpoint being to put products on the shelf of the retailer that the consumer would value (thus generate healthy margins) and want to buy. Beyond farm to market roads they also developed a trucking business – of refrigerated tankers – to take fresh milk from the farms. And to turn the milk into a feedstock for dairy products, they sought a German MNC to put up a processing facility, giving them the opportunity to produce downstream products like yogurt, snack food, and cheese. And they are now into developing (having tapped expertise from Denmark and Germany) a wide range of higher value-added products that they could market beyond their borders. (This example of a simplified process is meant to briefly describe the ecosystem covering the supply and value chain of an agribusiness industry; but it calls for foreign participation, not exclusion. And which is something we have yet to embrace?)

Why haven’t we developed the bias to connect the dots or to develop an industry and its requisite ecosystem? Unfortunately, on top of parochialism, we are from the old school of the cacique system and structure that was hierarchical- and capital-driven with very little dynamism called for, i.e., technology, innovation, and talent, product and market development. Instead, dominance and monopolistic tendencies – i.e., influence peddling and corruption – are what we developed. Competition is fair and square. The writer remembers as a young boy, perhaps from watching cowboy movies, kids would settle their spats by engaging in civilized fistfights – which in the vernacular was expressed: “square tayo.” And all it meant was, let’s see who wins – followed by a handshake.

Monday, August 27, 2012

Our worldview and economic prosperity

Senator Angara must be lauded, together with a group of young Filipino intellectuals, for creating the Angara Center for Law and Economics – which "aims to raise the standards of academic research and policy studies – a think-tank, Filipino at heart, global in outlook, grounded in research, and oriented toward innovation." Specifically, they "are coming together to study how the country may prosper through good law and economic policy-making." [Manila Bulletin, 29th Jul 2012] [What was not highlighted in the article is if the Center would pursue what a Filipino friend, an intellectual herself, would call a “symbiotic relationship with industry,” for example, the lack of which apparently is why UP, despite the requisite population of PhDs, ranks relatively lower against the rest of the world.]

The Executive Director of the Center, Dr. John V.C. Nye, came to our consciousness a year ago: One kaklase P-Noy should listen to,” was how Boo Chanco titled his piece of 8th Aug 2011, The Philippine Star. Dr. Nye isn’t like most economists we have met… he takes a stand and ordinary mortals can actually understand him. That’s because he doesn’t scare people off with esoteric econometric models and formulas but talks about the real world – the impact of elites, special interests and institutions on a country’s economy.”

Dr. Nye said he doesn’t understand why we have so many laws that bar the entry of foreign investment that would create jobs here in the country. We are so afraid of having foreigners exploit our labor at home but we don’t seem to mind letting foreigners exploit them abroad, he observed. Thinking global is the way to create jobs for these workers at home, he stressed . . . We . . . have policies like high minimum wages and strict employment protection in the industrial sector that prevents industry from absorbing more workers and thus spark the economy’s transformation. That is also why the unemployment rate for college graduates is higher than those with less education . . . Extreme nationalism, he said, turned the nation inwards in the 50s and 60s. Like Argentina, we basically raised the cost of capital and destroyed investment . . . Dr. Nye denounced what he sees as a marriage between nationalist and populist thinking with the interests of the elite in preserving restrictions to global competition. It is only global competition that can break the stranglehold of the traditional oligarchs on the economy, he stressed. This is specially so because we have weak institutions and arbitrary enforcement of rules . . .

Dr. Nye was realistic enough to acknowledge that the path to reform is difficult because entrenched interests will fight to keep their privileges . . . He also thinks we should be cosmopolitan… find ways to involve international players not beholden to local interests. We should encourage regional competition and increase market access so that different businesses are involved. Then, don’t be fixated on legal details . . . Finally, he called on us to always look outwards. Filipinos, he said, are not afraid of the world, so why not let more of the world in? By allowing more globalization, you will keep Filipinos working at home and not have to send them abroad. And he said, he is making these points from the perspective he has of world economic history… of how winners and losers are made of economies through time.”

This blog’s reason for being is to challenge Juan de la Cruz – to reinvent himself – and can thus relate to how Dr. Nye marries the real world with the body of knowledge from his field of expertise. But where is the writer coming from? He is a practitioner that has worked with folks from the region during the decade they were labeled Asian tigers, and over the last ten years with Eastern Europeans. And in both these parts of the world people have pursued purposeful development (admittedly far from perfection) notwithstanding their history or their culture or whatever. And Dr. Nye is effectively challenging us to revisit our long-held beliefs – or to reinvent ourselves in the writer's lingo. But can we when we take them as a given because they represent our culture? For example, how do we contemplate the point Dr. Nye makes re the elites when in our hierarchical culture we defer to them? And that reality is best demonstrated by our power crisis, with special interests behind the industry? Or even the thought of bringing down economic barriers in favor of foreigners? Or being outward-looking when parochialism is second nature to us? These are questions to Juan de la Cruz, beyond President Aquino, because we need a new perspective not only from our leaders going forward. And as Miami’s Fil-Am coach Erik Spoelstra says, “one’s heritage or background should not matter . . . the world is changing.”

Thursday, August 23, 2012

The redemption(s) of Enrile

Reading the Senate President’s “A harvest of dreams” – the speech he delivered at the opening of the Third Regular Session of the Fifteenth Congress – would arguably make one take in positive thoughts about Senator Enrile. Filipinos have had a roller-coaster relationship with him – from good to bad to indifferent? Yet every now and again, he demonstrates his altruism? And people saw how objective and impartial he was during the Corona impeachment trial – until, of course, the ex-CJ shot himself in the foot, admitting while justifying his unreported assets. The debate shall never cease – whether that was an impeachable offense. But if we are to establish the rule of law for the umpteenth time, we have to start somewhere. And since rank has its privileges, one occupying such a lofty post – and especially charged to uphold the rule of law – must meet a higher standard than Juan de la Cruz. Similarly, Juan de la Cruz must have no equivocation that a red light means stop. It is encouraging that the search for the next CJ has elevated the axiom that “justice delayed is justice denied.” There ought to be no two ways about it. Democracy and the free market presuppose transparency and political maturity.

Senator Enrile demonstrated once again his grasp of the nation’s ills and in such a short discourse. And it also says that the Senate is indeed the citadel of wisdom – as gleaned from the focus of its legislative agenda: from recognizing our cacique culture that perpetuates influence peddling and thus the need to create a level playing field to transparency to the imperatives of investment and technology to drive industry and the economy to protecting the interests of Juan de la Cruz and his future and thus the environment, among others.

The one item from the Senate’s legislative agenda that gives pause though is the one that says institutionalizing the participation of civil society organizations in the preparation of the annual national budget.” That sounds altruistic but it must not become a vehicle of discord and ultimately compromise that will only reinforce our “crab mentality.” The key to such an initiative is to strengthen our definition of the common good; for example, the budget must establish basic parameters like “purposeful enterprise” or critical mass. It cannot be akin to pacifying kids. For over several decades we’ve been patronizing to Juan de la Cruz – while giving a wink and a nod to oligarchy via a culture of poor governance (i.e., influence peddling) that favored special interests – thus stunting the development of political maturity and ensuring mediocre economic performance. And as we got deeper and deeper into our ways of sub-optimized allocation of resources, we had to resort to social engineering (to appease Juan de la Cruz) that proved shortsighted and counterproductive – e.g., land reform, a distorted wage index that overvalued unskilled work, party-list representation, regional white-elephant infrastructure projects, among others – and has only driven us farther and farther away from the common good and thus undermining the interests of Juan de la Cruz himself.

If we think democracy is flawed, the world now knows that socialism Soviet-style has failed most of the satellite countries with the balance carrying on with autocratic rule, adding insult to injury. And with Russia itself seemingly in denial, reasserting strong-arm tactics as oil revenue fills their coffers. But they may be pushing their luck, indifferent to the imperative of industrialization. (The old debate between industrialization and agriculture no longer holds: agribusiness is in fact an industry where success can’t come from the outdated passive model of contract production but via an ecosystem founded on state-of-the-art technology (across the supply chain) and product innovation (across the value chain.) And to be parochial is not the way to get there but by being a good global citizen.) And the writer is reminded about this by his Eastern European friends with whom he has worked and lived for most of the last 10 years. Socialism may sound romantic but its reality confined millions of them to what they now call “their dark ages.”

But to make democracy and free enterprise work, we must learn to embrace dynamism. A passive culture does not lend itself to dynamism and thus gives the fittest the playing field all to themselves? One prominent columnist wondered aloud why there is only one native Filipino among our billionaires, and is it our lack of dynamism that is at the root?

Monday, August 20, 2012

Prioritize and focus

To be inclusive meant that President Aquino had to recite a laundry list of accomplishments in his 3rd state of the nation address? That is not to undervalue the successes of the administration yet it brings to mind the scribes and the Pharisees, who were admonished to focus on the Great Commandment, notwithstanding the 300 tenets they knew by heart. But the president is expected to satisfy each and every constituency, not to mention the pet ideas and projects of favorite government and industry players – and other thought leaders. And not surprisingly the SONA had to be long.

Still, the administration is on the right track, but should consider moving beyond plucking the low-hanging fruit. For example, beyond celebrating the express interest from foreign investors, we must seek to be a competitive economy. Thus, we must get the basics right like yesterday – e.g., infrastructure, agribusiness, manufacturing and logistics – via technology- and innovation-driven investments. As one senator noted, foreign investors have been raising the issue of power – the kind of disaster that will haunt us when we unwittingly outsmart ourselves (e.g., doing an exhaustive analysis ought not to freeze us into inaction) and are deferential to oligarchy?

Likewise, it would not be enough to say that the restrictive economic provisions of the constitution are not a priority. The rule of thumb in benchmarking is to identify the positive and the negative elements (and how we measure against benchmark countries) and to prioritize and fix those that are the major barriers. In short, the administration, if it is to successfully engage Juan de la Cruz in the efforts to drive the economy, must put that up for the latter to appreciate the Philippine challenge, and thus get his buy-in. That is what transparency is about; it is not some esoteric notion. Put another way, we can’t be patronizing to Juan de la Cruz, which is at the root of our inability to develop political maturity? [It brings to mind an old best seller, “I’m OK, you’re OK.”]

The administration would also need to explain to Juan de la Cruz that our economic frailty comes from underdevelopment, or as President Ramos described it, "The pie is too small." There is not enough to go around; and indeed it is glaring when we put our GDP per person side-by-side with those of our neighbors. And as Clinton would put it, "It's the economy, stupid"! Ergo: We’re not making a dent on poverty because we’re not hitting the nail on the head; not even with high-profile initiatives like land reform, pushing a living wage (which has made us uncompetitive by overvaluing unskilled work) or the party-list representation, supposedly to give the poor a voice in the legislature.

The writer's Eastern European friends shared some long-held thoughts recently as he was preparing for his summer break back to New York: “Competitive advantage does not come from selling cheap products but from products that the consumer values.” [And Maslow captured it in his hierarchy of human needs.] "Your margin focus totally changed us; we became more dynamic.” They were selling cheap until they saw the risk to their viability. “We must get to the next level. We know we’re doing something right – that we can sell our products – but there is something we are missing. Don’t just tell us what we’re doing right; please tell us what we’re doing wrong.” They professed to want change yet struggled to confront the need to reinvent themselves. On the other hand Juan de la Cruz would be quick to say, “alam ko na iyan”! – “I know that already”! Is it why we’ve mismanaged our economy for decades?

And when the writer gets back from his holiday, they’ve already organized a series of classroom sessions. They want to revisit one imperative: to be faithful to the fundamentals – and the mechanics – of the business, which they have heard and espoused over the last 10 years; and have hurt Western global behemoths in markets where they compete. But they also know that sustaining competitiveness is 24/7, i.e., dynamism has become instinctive to them. And these are ex-socialists, used to getting their daily ration of bread and vegetables and were told how great their life was! Unfortunately, as a Filipino friend says, “we can’t change our culture.” That will only ensure that the next generation would be in the same boat?

Thursday, August 16, 2012

A purposeful enterprise

Spain has not gotten itself off the headlines. And Greece, Italy and Spain have in fact been hugging the news for some time now. A plane has finally reached the ghost airport of Castellón, in southeastern Spain. [NY Times, 18th Jul 2012] Rather than sitting on the runway, however, the aircraft, an aluminum model, was placed this week atop a giant statue along the entrance road to the airport — another twist in the tale of a $183 million project that has become a symbol of the wasteful spending that has sunk Spain deep into a recession and a banking crisis. The statue, 79 feet tall and budgeted at $375,000, was supposed to honor Carlos Fabra, the longstanding head of Castellón’s provincial government and the driving force behind the airport project. As part of a decade-long construction and housing boom, Spain added airports, toll roads and railway lines, often under pressure from regional politicians seeking a greater presence within the national transport network. Many of the recently built highways are now deserted, and only one-fifth of Spain’s airports made a profit last year.”

Sounds familiar given that many of our rural airports in the Philippines are white elephants? Human nature constantly takes the imperative of “purposeful enterprise” for granted; and so even in the private sector, supposedly more disciplined, including globally competitive enterprises, the failing is commonplace. “Johnson & Johnson has fallen behind its peers "in our view due in large part to underinvestment … and a lack of focus on the specific needs of each business," reports USA Today, 18th Jul 2012. And from Bloomberg, 17th July, “Procter & Gamble’s 5-year performance has trailed each of their main competitors . . . For the better part of the decade the better performers have been those with more focus . . .

51 party-list representatives are millionaires,” Inquirer News, 19th Jul 2012. “The Commission on Elections should not allow millionaires to sit as party-list representatives in Congress as this is tantamount to depriving underprivileged Filipinos of the right to be heard in the legislature . . .”

In the private sector it is well understood that critical mass is fundamental because it is crucial to viability. And the converse is: absent critical mass the undertaking is a non-starter. Machiavelli understood it well – thus divide and conquer. And we are always reminded of this fundamental truth in the story of the loaves and fishes. But whether it is compassion or its opposites like vanity or greed, human nature would almost always defy it.

Is purposeful enterprise on the radar screen of Juan de la Cruz? Unfortunately, despite scarcity of resources, we seem to value paternalism more – which explains what President Ramos calls our "crab mentality"? But we see it as a positive because it comes from our compassionate nature? Yet it undercuts political maturity and, conversely, reinforces our cacique system and structure, manifested in arguably the shortsightedness of major initiatives, i.e., land reform, party-list representation, a distorted wage index that overvalues unskilled work, etc.? Have we unwittingly embedded Machiavelli in our system or is it socialism? Or is dynamism simply non-existent in a cacique environment?

If the failure of the West has been brought about by "financial engineering" and evidenced in the Great Recession, our failure has been brought about by "social engineering" and demonstrated in our elevated and long-standing poverty? Unfortunately, we sincerely believe that social engineering is the solution to poverty when our poverty – unlike what they have in the US – is a consequence of underdevelopment. Of course, Juan de la Cruz who can't put body and soul together has a more urgent need for survival. And that is precisely why leadership matters. And beyond leadership, we need more altruism, not paternalism.

A purposeful enterprise seems elusive to Juan de la Cruz? Yet our history says our forebears were more sophisticated than that. For example, they understood and embraced the imperative of international trade (i.e., with China’s Song Dynasty and Brunei, among others) even before Magellan came. And so beyond tourism and gambling, we must reach out to the world for technology- and innovation-driven investments, develop our infrastructure, agribusiness and manufacturing and logistics, and sustain a competitive economy – a requisite in the 21st century. It's what dynamism is about.

Sunday, August 12, 2012

SONA: managing expectations

As President Aquino prepares for the SONA, various quarters – including the bishops – have been busy with their critiquing. And as to be expected, the administration has to stay engaged to ensure that Juan de la Cruz gets a balanced perspective. In fairness, given the hand the administration was dealt, the challenge is way beyond one or two or even three administrations. And the rule of thumb in managing expectations is to under-promise and over-deliver. Unfortunately, in politics, the formula to win votes is to over-promise. But that is why the Clinton more focused model – "It's the economy, stupid" – has been adopted by politicians in other countries, including the hiring of James Carville as adviser, for example.

President Aquino in fact focused his promise on fighting corruption. Except that he raised people's expectations by coupling it to poverty-eradication: "Kung walang corrupt walang mahirap." It made people see a one-to-one relationship. And thus they thought he was not demonstrating the same zeal in the management of the economy as he did against corruption despite throwing tons of money to the CCT (conditional cash transfer) program. What then?

It appears that while the JFC (Joint Foreign Chambers) proposed 7 strategic industries, our economic managers teed up 13. We may need all of them, but there is no harm in breaking it into an A list, a B list and even a C list. The axiom: Make it fewer to increase the probability of execution. “The more the merrier” doesn’t work in major undertakings. And the A list is where the president could focus his attention. Take agriculture, for instance: we already have the agribusiness road map, but the president can then twist the arms of the economic managers to translate it into reality. In one word, execute: who will do what, when, where and how? And it better be acceptable to the president! We need a “CJ Corona moment” or a closure in our agribusiness effort. The president can likewise ramp up the rest of the A list, e.g., infrastructure [with power at the top of the list] and manufacturing and logistics.

Given that the Philippine challenge is generational – it will take a generation to move us from underdeveloped to a developed economy – the CCT is clearly a stopgap. It may be necessary to keep body and soul together (of millions of hungry Filipinos) but it does not measure up to the promise of poverty eradication. And so while the administration must communicate and keep Juan de la Cruz engaged to ensure he gets a balanced perspective, they may have to redefine the administration's fundamental promise. The axiom: No amount of promise and communication can turn an inferior product into a winner – and why successful marketers are a disciplined lot, being faithful to the fundamentals. For example: “We cannot eradicate poverty overnight but we must fix the drivers of the economy by developing strategic industries that will elevate our competitiveness. I personally will supervise 3 and my cabinet will concentrate on 4 and oversee 6 more. You are the boss so we shall keep you updated of progress, good and bad.”

To be unfaithful to the fundamentals could undo even the guys who arguably are among the best in the business. "Procter & Gamble’s 5-year performance has trailed each of their main competitors . . . For the better part of the decade the better performers have been those with more focus . . . You can't turn a $180 billion ship on a dime. It needs a kick in the rear . . . They need an activist to shake things up and effect change . . . They have an awful lot of potential that could be unlocked with the right kind of restructuring [e.g., divest 3 iconic brands.] They may hire a bank to advice on restructuring options and a PR firm [for the requisite communication campaign.]" [Bloomberg, 17th Jul 2012.]

PHL is a bit bigger than P&G with a GDP of $216 billion. But our performance has lagged each of our neighbors for 5 decades – and thus our elevated and long-standing poverty. Ergo: We must step up to the plate and recognize, labor and overcome a daunting task; specifically, to attract, pursue and secure the requisite levels of investment and technology and innovation – and mirror competitive economies. Writes economics professor Edsel L. Beja, Jr., PhD, of Ateneo, "Filipinos should not be deceived with the pronouncement like the Philippines is one of the "break-out nations" because, as the data show, the Philippines is not." [Philippine Daily Inquirer, 14th Jul 2012.]

Thursday, August 9, 2012

Beyond the Constitution

It is more than the Constitution that is setting us back; it is our worldview or our mindset or values or culture? And which is why despite having the three co-equal branches of government – and a supposedly fairly crafted democracy where check-and-balance is enshrined – “the rule of law” is not associated with PHL? Is our parochialism setting us back in the 21st century world that is interconnected? Or is it our hierarchical system and structure in the era where people are risking their lives in pursuit of an egalitarian society? Is it our penchant to personalize when the higher order ought to be the common good? And not surprisingly, we nurture a cacique culture where rank and privilege is bestowed on the few in exchange for entitlement – i.e., paternalism as opposed to respect – for the rest? Have we then unwittingly created the fertile ground for abuse and corruption?

And we can't undo our Charter because we value and thus don't want to forego our control over our land, utilities and media? And we proudly pursued land reform in the name of social justice – that has proved to be shortsighted when it could have been a platform for a globally competitive agribusiness? We value and don't want to forego control over utilities because they are part of the nation's security but sadly confining us to the "dark ages" – unable to lit our homes and businesses? We value and don't want to forego control over media because of its power of influence – which is consistent with our value of hierarchy – thus reinforcing influence peddling?

And is the foregoing one way we would describe our culture – and which we accept as an accident of fate? The saddest part is we seem to know what we want yet because we are so “inclusive” in our perspective we can’t separate the wheat from the chaff. And we get deeper into the “trivial many” and find ourselves farther and farther away from the “vital few” – thus our inability to prioritize. For example, it is the 21st century and we are still debating about power and about NAIA 3! Aren’t they essential to day-to-day life? The JFC (Joint Foreign Chambers) worked with a cross-section of society, both public and private, to develop “Arangkada Philippines” – which spells out the 7 strategic industries meant to attract $75 billion in foreign direct investments, generate intermediate industries and activity and thus over $100 billion in incremental GDP and millions of jobs. But we would rather pursue gambling – because it’s a quick fix like OFW remittances? “Pinoy abilidad” is about side-stepping a problem?

Could it be that President Aquino is not predisposed to revisiting our Charter because over the last two years, he has experienced how every initiative was not unlike pulling teeth? But how do we make the pursuit of major initiatives less painful? It is not the form but the substance. It is not the structure but our maturity. Unfortunately, maturity like morality can't be legislated – it is part of growing up and why certain economies remain underdeveloped. And which we recognize and thus are stepping up investment in education?

But that vendor is “kawawa” – let him encroach on the sidewalk! Oh, he just built our church, let him with his business endeavors – we need these basic utilities; better him than foreigners!” [Who cares about competitiveness and developing technology and innovation and people and products and markets anyway?] And that is how the common good goes out the window. And then we wonder why our system is not inclusive? Inclusive can't exist in a cacique environment and so we compromise and resort to paternalism – which all the more undermines political maturity. But everyone is happy because it preserves our most cherished value, hierarchy?

Of course we must revisit our Constitution! But it is not the be-all and end-all! And given it threatens our inherent values, we don't see it as a priority? Then, what we need is an understanding of what we are and what we believe in and what we value! We’ve relied on our institutions to set the norms and conventions, but just like the church, we are the institution, a reflection of Juan de la Cruz – whether it is government, industry or academia? How could we then address the future of Juan de la Cruz? It presupposes that Juan de la Cruz must grow up. Otherwise we shall be in the same trajectory as the US – where greed has undermined their Protestant work ethic.

Friday, August 3, 2012

Trickle down is sub-optimal

The writer remembers a conversation with a tycoon and like all successful enterprises, like in athletics, these folks 'are in a zone.' "We're heavily committed to the nation as you will note, yet we are always reminded that our economy remains underdeveloped . . . There are many things that are undermining our progress but as entrepreneurs we have to navigate around these obstacles."

Given that we substantially lag the investment levels of our neighbors, as night follows day, we likewise substantially lag in economic output. While we have a handful of tycoons and countless smaller entrepreneurs, collectively, we only have very little to show investment-wise. And given the multiplier effect of investment, our entrepreneurs are wealthy especially because of our large population base and the over $20 billion in OFW remittances. Yet investment in the 21st century is diametrically opposed to our cacique past when goods and services were very basic. It still works in an underdeveloped nation like ours and yet it explains why our marketing community recognizes that our products can’t travel outside our shores. It is not about advertising or exports per se; it is about competitiveness. We are unable to export our products – to the much bigger global market that could raise our national income substantially – because they don’t deliver higher value-added benefits. And which is why investment in this day and age has to be coupled with technology and innovation. The old paradigm no longer applies. And the biggest fallout is Juan de la Cruz paying the price for his disorientation in the 21st century world?

The paradox, unfortunately, is that the supposed positives we see in our economy – wealthy entrepreneurs, large population base and robust OFW remittances – create their own ecosystem that for those in the establishment makes our economic fundamentals strong. Yet there is a large segment of the population that is marginalized thus breeding elevated poverty – and consequently our fight against poverty and call for inclusiveness. But there is a wide fissure between the rhetoric of inclusion and its reality. As Harvard professor emeritus Edward O. Wilson postulates, unless we have more groups that are altruistic, Juan de la Cruz would be sitting pretty owing to our 'strong economic fundamentals.' And while we are critical of the US model of trickle-down economics, we in fact have mirrored the model. The big difference is the US is a highly developed economy and thus their growth trajectory is not as appreciable as our potential being an underdeveloped economy.

The bottom line: we have to steer off the complacency of ‘strong economic fundamentals’ simply because there is only one Juan de a Cruz. We can't define our economic fundamentals strictly for those within the establishment – or we shall in fact be frozen in time, i.e., in our cacique ecosystem! On a roll, but not quite,” quips the iconic Solita Monsod. [Philippine Daily Inquirer, 6th Jul 2012.] The Philippines is in the bottom 25 percent (4th quartile) of the 180 economies measured in so far as attractiveness is concerned, although it is in the top half (2nd quartile) of countries with regard to potential. Not surprisingly . . . we are performing “below expectations.” The Philippines is among the least attractive of countries to inflows of FDI, and the FDI it attracts contributes the least (relative to other countries) to our development.”

While international agencies have their share of the blame for the underdevelopment of many countries, life was never meant to be fair – as countless would have read from the story of the young Henry Sy. And as the writer would hear from the stories of his Eastern European friends – the past does not predict the future because the human spirit fuels self-improvement. [Reality was a lesson the writer struggled to learn from his Jesuit friend – May he rest in peace! It was many years later before he appreciated it and then understood why the friend kept the topic alive for so long.]

If we are not blaming international agencies we are blaming bully countries – because it is not easy to articulate why the successful efforts of our neighbors, for example, and founded on a broader economy with high levels of foreign investment and technology, don’t apply to us or that they violate our faith or our culture? The sun shines on everyone and thus the future is fair game. Juan de la Cruz is capable of growing up?

Wednesday, August 1, 2012

Green shoots are to be tended

Mababaw ang kaligayahan” – which roughly translates to “easily pleased” – is how a friend would explain why we have fewer exporters today. She remembers those who after winning a contract sooner than later would be off on holiday to Europe – but, of course, these were side trips, the pilgrimage to the favorite shrine was the object? What happened to the business? They would scrimp on quality and worse would cease product development: “our creativity is unmatched and our product is like no other”! [Sounds like the jeepney?]

Feta cheese, which is increasingly popular throughout the world, is mandated by an E.U. ruling to come from Greece. The country also harvests arguably the best olives for making olive oil. Yet somehow Greece has only 28 percent of the global feta market and a mere 4 percent share of the international olive-oil industry.” [NY Times, 3rd Jul 2012] “How is this possible? In the last decade or so, companies in the United States, France, Denmark and elsewhere flouted the feta ruling and invested in their own food-science research and manufacturing equipment. They subsequently turned the salty, crumbly cheese into spreadable, grillable, fat-free and shelf-stable forms. In Italy and Spain, small olive-oil producers merged into globally competitive conglomerates and replaced presses with more efficient centrifugal technology. The two countries now provide nearly all the world’s supply. And the Greeks, despite their numerous inherent advantages, remain in the least profitable part of the supply chain, exporting raw materials at slim margins.”

A swallow doesn’t make a summer and so we Filipinos ought to recognize that while green shoots are most welcome and should be celebrated, the 21st century world demands “globally competitive” efforts. Not perfection – so we can’t take consolation from the imperfections of others. In accounting parlance, it’s called net worth – we have to keep lifting our positives not nursing our negatives. Otherwise we’d be committed to a juvenile economy.

European Union authorities have issued an ultimatum to the regional government of Valencia [Spain] to explain by this week how it intends to recover $325 million in taxpayers’ money improperly spent on movie mogul ambitions.” [NY Times, 8th Jul 2012] “In the aftermath of Spain’s banking bailout in June, the central government in Madrid is facing intensifying pressure from investors to balance the country’s books by curbing the regions’ powers over spending, particularly on health and education. The conservative government of Prime Minister Mariano Rajoy has also blamed the regions for much of Spain’s recent fiscal problems . . .”

Greece and Spain have pursued ideas that aren’t exactly different from how Juan de la Cruz sees the world? “Philippine agriculture hosts millions of farmers, fishers and landless workers below the poverty line. It is not competitive in the global markets . . . The answers lie in low productivity, poor diversification in crops and fishery, and undeveloped value adding. The record of tree crops expansion is dismal. Export winners (coconut, banana, pineapple, tuna, and carrageenan) are the same since the 1980s. The country is the only net importer among ASEAN peers . . .” [Balanced farm and fisheries growth; MAP Insights, Alejandro T. Escaño; Business World, 4th Jun 2012]

Spain’s fledgling democracy drew up a new Constitution after decades of authoritarian rule under Gen. Francisco Franco . . . Gradually, the regions were put in charge of more of Spain’s public expenditures, eventually accounting for about half — twice the level of three decades ago.” [ibid]

In the Philippines because of imperial Manila or the dominance of big political machineries or the Marcos dictatorship, we wanted greater check-and-balance – e.g., decentralization? But decentralization is no panacea because the reality is representative democracy demands political maturity. No pain, no gain? Structures are a false insurance – both in the private and public sectors – in the absence of a purposeful enterprise. And so governors can’t be islands unto themselves like the Philippines can’t be an island unto itself? What about our party-list system? Is it a false insurance as well? We are simply spreading access to pork barrel – and reinforcing parochialism a.k.a. “the bridge to nowhere,” like our underutilized rural airports? It would work if there is enough to go around 100 million Pinoys otherwise it’s simply “crab mentality” all over again – i.e., we’re back to square one?