Monday, October 29, 2012

Like in tennis, advantage can shift to the competition

Vu Tu Thanh, Vietnam representative for the Washington-based US-ASEAN Business Council, said Vietnam has lost the reputation it enjoyed a few years ago for being among the most attractive destinations for investment in Asia. Would-be investors, he said, want the government to push through large-scale economic reforms that will weed out the most inefficient state businesses,” Time World, 24th Sept 2012.

Been there done that? For years we’ve lagged the region in foreign direct investments, and would-be investors wanted us to push through economic reforms. Those who have done business in Vietnam would be the least surprised they would shoot themselves in the foot. For the moment they still are ahead of us in terms of accumulated FDIs and hopefully if we keep our noses clean the advantage would shift in our favor.

Competition is a 24/7 reality and countries like us and Vietnam can’t think of competition as a campaign that starts and stops. It never stops. Beyond rigorously addressing the shortfalls in our global competitiveness rankings, it is important to recognize that the critical elements of competition are ticking all the time: somewhere a hundred miles away if not a thousand or ten thousand miles, there is someone investing and upgrading their technology in order to come out with the latest innovation for their product and the learning cycle is simply elevating the skills of their people thus creating an innovation culture that gives them the ability to capture new and dominate current markets. [I wrote this longish sentence after two separate teams of Eastern Europeans had presented their game plans before traveling to Germany and Hong Kong because these markets are keen about their products. In the Philippines we talk about the shrinking global economy because we are yet to internalize what competitiveness is about.]

And thus especially for a nation like us that has been scraping bottom for some time now – i.e., we lag Thailand, Malaysia, Indonesia and Vietnam in gross investment, FDIs, exports and, not surprisingly, have a greater poverty challenge – we must recognize and gear up to overcome this ever daunting challenge. And not applaud our oligarchic model founded on influence peddling and monopoly power and thus dominance in the local market. It explains why, as some legislators have noted, vested interests have been blocking foreign investments – and why we are starved of technology and innovation and consequently are globally uncompetitive, underdeveloped and poverty-stricken.

Thankfully we have the JFC (Joint Foreign Chambers) stepping forward with Arangkada Philippines – designed to raise $75 billion in investments and drive 7 strategic industries that will generate millions of jobs and deliver incremental GDP of over $100 billion. So why aren’t we grabbing and running with Arangkada?
President Aquino’s “daang matuwid” has encouraged foreign investors to give us another look especially now that others have been shooting themselves in the foot. Our own black marks are not few and thus Juan de la Cruz ought to display a greater sense of urgency. And that means we have to learn to operate beyond our own world – call it culture or whatever – and demonstrate that we have brought competitiveness down to our heart and to our gut. For example, we must demonstrate that we can put the power issue to bed! Or do we like to think that we’re market-economy champions and that local investors are already on top of it? Sounds like the oil industry in the US writing the road map of the industry? That is not how the Asian tigers became Asian tigers. Their governments defied the US model and crafted a unified development plan such that in a relatively short period of time they became First-World economies.

The bottom line: resolving our key challenges – power, basic infrastructure and strategic industries – must be our mantra. And the test of the pudding is in the eating. And that means the world especially foreign investors are able to see through the transparency of our game plan – not that we are giving a wink and a nod to our favored few. To foreign investors that is the real story of corruption in the Philippines; but in corporate speak it sounds tactful: “Our policy is to invest in countries where there is a level playing field.”

Thursday, October 25, 2012

Thinking outside the box

Beyond the fight against corruption – where we must remain vigilant – we’ve made progress in raising our competitiveness as reflected in the most recent global rankings. Yet given we are ways away from becoming a robust and a sustainably growing economy, like in the fight against corruption, we must step up our efforts in driving competitiveness. For example, we must develop the instinct to think outside the box.

Has our sheltered culture – to shelter us from the influence of the secular world, a carryover from the parochial and hierarchical structure of the church – tempered our inquisitiveness and expansiveness critical in the 21st century world? And it’s no different from what Rizal saw during his days – and so he took up the cudgels for the rest of us – and no different from the debate within the Vatican? And today our culture mirrors aspects of the church that we are in fact proud of – like our “opo” and “mano po?” My daughter with most of her grade school years done in Manila is profuse with her “opo” when with Filipino elders but on a dime, with non-Filipinos, turns into a western. Like me she grew up wanting to please her parents. But what does that really mean? Intuitively, as parents, we assume we must be obeyed? And so we take it for granted, for instance, that we can snap at our children – because parenthood gives us the rank and the privilege? That’s fine if in return we won’t mind our children snapping back at us? “Fathers, do not provoke your children to anger by the way you treat them . . .” [Ephesians 6:4]

Our hierarchical society has kept us behind the times. And it was refreshing that a cardinal (May he rest in peace!) would raise the issue with the church. While a priest-columnist recently discussed academic freedom; and hopefully we take it beyond lip service? As Steve Jobs would explain, it was California’s tolerance for the counter-cultural that opened his eyes to look and think outside the box – that is at the heart of the Apple brand. (And analysts estimate the record sales of iPhone 5 will buoy up US GDP this year.) Around the world and irrespective of culture, people are glued to their Apple gadgets whenever they need to shut the world out – in trains and boats and planes. My wife and I were recently on an 11-hour train trip from New York to Montreal and my Eastern European friends had access to me and vice versa.

Yes, every human idea has a downside and man can choose evil over good! And it’s easy to point at others – be it our notoriety in corruption or our being economic laggards? But where is our failure to innovate, for example, coming from? Do we instinctively see kids or subordinates as inferior? The boss has all the answers? And so in the 21st century we’re paying the price for missing the imperative of innovation, and thus have the least patents to show in the region? We have our “muchachas” and in the west they only have “cleaning ladies.” It is not the label that matters it is how they are perceived? In the Philippines I was called “sir” or “bossing.” In Eastern Europe early on I needed an assistant, a translator and a driver. And in the Philippine that would mean hiring a staff of three? But the incremental two jobs I would have created can’t compare with the multiplier effect of an efficiently functioning economic activity! Unfortunately, we could miss such a reality because of compassion – e.g., like our failed land reform program?

I hired one young college kid to be all three and he called me like my friends did. He kept normal working hours (being a working student) five days a week, beyond which my wife and I would have to make special arrangements. He would see his work from different perspectives: “I could see how the dots were connecting.” Beyond translating he found himself explaining in their language the nuances of discussions and decisions. “Tell me what you need and why and I will get you a user-friendly report in the intranet,” he once said to a senior manager. And our managers access our intranet constantly because it facilitates decision-making – even when on a train in North America.

Should we then be asking: Why haven’t we created a society that is progressive, that is forward-looking and an economy that is value-creating and robust and growing? No wonder a tycoon can put a gun to our head because we are hanging by a thread – with no track record in attracting investments?

Sunday, October 21, 2012

“Christianity is a profoundly realistic faith . . .”

Thus writes Amy Welborn (an American Roman Catholic writer, public speaker and theology teacher) in the Living Faith, 15th Sept 2012. “Some religions declare suffering to be an illusion. Our own popular culture encourages us to try to ignore or distract ourselves from suffering. Christianity does none of these . . . not because we are masochists but because we are realists . . .”

Indeed it is good for our national psyche to be gung-ho especially when our GDP numbers appear robust as our economic managers pointed out in their projection of a strong finish in 2012. [Business World, 17th Sept 2012] Unfortunately, when the numbers [GDP forecast trimmed, Business World, 13th Sept 2012] show a less than favorable trend, we jump all over looking for someone to blame – obviously the administration especially when the unemployment picture looks worse when combined with the underemployment number? [Underemployment surges, Business World, 18th Sept 2012]

We are an underdeveloped economy and poverty precisely comes with underdevelopment. Are we influenced by how Americans react to US GDP numbers? That is like comparing apples and oranges. The dynamics of our economy are different from a fully developed one like the US. A 6% bump in their $15 trillion GDP is over the top. But in our case, until we get our structure fixed, a one-time 6% increase doesn’t erase our infrastructure gaps nor raise our industrial capability – which we must address if we are to be a sustainable economy. And so beyond our quarterly or even annualized GDP numbers, we must recognize our structural challenges. And our economic managers know them. We are still a consumption-driven economy (with a huge hole investment-wise) and thus OFW remittances remain a key economic driver. And so we recognize the necessity of raising gross investment like our neighbors have done, and that means aggressively attracting foreign direct investments.

Our economic managers have endorsed Arangkada Philippines, an industrial development game plan from the JFC (Joint Foreign Chambers) that will attract $75 billion in investments, raise our GDP by over $100 billion via seven strategic industries and create millions of job. That is no small challenge and it gets much bigger with international agencies confirming (at 7% annual growth) that it will take us over a generation to become a developed economy. And it is why President Aquino’s personal fight against corruption is getting sympathy and support even from beyond our shores. Every moment of the day it appears corruption is able to rear its ugly head: starting at the highest echelons of our society with influence peddling, all the way down to the hoops one must jump through when paying taxes – or something even more innocuous as mail from overseas especially the US being pilfered (because it is assumed they have something of value?)

The administration understandably must present a brave and happy face given the enormity of their charge. Our economy lags in many respects. [PH economy 'unfree,' judiciary 'inefficient', Business Mirror, 19th Sept 2012; Worst ‘branding’ in Asia, Manila Standard Today, 21st Sept 2012] We need more than happy talk! It is noteworthy that industry wants to talk about transformation. But has Philippine industry understood and accepted that transformation must mean that the very foundation of our industry isn’t gamed for the benefit of the few?

And not surprisingly, a tycoon is threatening to pull out the investments of their foreign principals? How could Juan de la Cruz allow himself to be under the gun? Unfortunately, that’s what our parochial and hierarchical culture is about? Benchmarking is not instinctive to us. For example, a tiny country in Eastern Europe, with barely 7% of our population, has generated more than twice in foreign direct investments – $53 billion against our $26 billion! Thailand has $141 billion. Malaysia has $112 billion. Vietnam has $66 billion! The bottom line: We keep shooting ourselves in the foot given our parochial and hierarchical bias?

Tuesday, October 16, 2012

“Why Sony did not invent the iPod”

That’s from John Kay, “one of Britain’s leading economists, whose interests focus on the relationships between economics and business.” [, 5th Sept 2012.] “Narratives of industry evolution often represent fairy tales constructed by corporate financiers, or ambitious chief executives. They relentlessly seek rationale, however spurious, for the next deal. Remember the cradle-to-grave financial services business that would arise from the merger of Travelers and Citibank? Or the seamless home-to-destination service that would follow from United Air Lines’ purchase of car hire and hotel businesses?”

So why did they not come to pass? The explanation can be found in Clayton Christiansen’s analysis of the innovator’s dilemma. Established companies in an industry are naturally resistant to disruptive innovation, which threatens their existing capabilities and cannibalizes their existing products. A collection of all the businesses which might be transformed by disruptive innovation might at first sight appear to be a means of assembling the capabilities needed to manage change. In practice, it is a means of gathering together everyone who has an incentive to resist change . . . Economic growth is held back by industries where established interests are so powerful that disruptive innovation can be staved off for ever. Financial services is probably one. And education another. I think often of the contrast between the power of information technology to transform the process of learning, and the little progress that has been made towards actually doing so.”

They relentlessly seek rationale . . . for the next deal.” Sounds familiar? Or why in the Philippines our largest enterprises are conglomerates? And we give them standing ovations for their successes but unwittingly as a people we are wedded to bygone days that by default we have been resisting change? Cobbling together different companies or businesses under one roof does not, like a magic wand, necessarily create an innovation culture? Innovation has to be in the DNA of an organization. It may not be there to begin with. But if there is no necessity to develop an innovation culture – because growth could come from the next deal, an acquisition or a new business that will make the conglomerate dominant in the local market – it won’t be spawned? Not surprisingly, we have the least patents to show among the countries in the region. And prospectively are still suspect since we lag in both gross investment and foreign direct investments.

And thus the successes that we celebrate can’t travel beyond our shores (and why only one PHL publicly traded enterprise has made it to the Forbes Asia Fab 50) meaning “competitiveness” to us is still at the intellectual level. We are focused on raising our global competitiveness ranking yet our industry’s success model does not match the demands of the 21st century world! And because of the glaring social chasm we are witness to and the imperative to make the economy inclusive, we are pursuing the next best thing: government (e.g., CCT) and corporate social responsibility (e.g., livelihood projects)? Unfortunately, we are inadvertently fortifying a way of life and a way of doing business and an economic model that is designed to benefit the few. And no wonder the DBM or budget secretary, responding to a Philippine icon, Washington Sycip, says we need to continue with CARP, despite its shortsightedness and failed history, to combat our social ills and communist insurgency. [The Philippine Star, 18th Sept 2012] Sadly, we seem not to have learned and are still fighting the last war. Tokenism and condescension cannot address the root of our problem: a lopsided economy that has stunted economic development and made us economic laggards.

I often talk about my Eastern European friends who still can’t figure out why in the Philippines we talk about communist insurgency. They’ve lived through the backwardness that characterized communist rule and had to dig deep into the human spirit to commit to the egalitarian ways of global competitiveness – because they realized that it is fair and square with no free lunch. They have embraced the imperative of investment: in technology, in innovation, in talent, in products and in markets beyond their shores.

Until we come to terms with what truly ails us we run the risk of barking at the wrong tree – if we aren’t yet?

Saturday, October 13, 2012

Positive thinking not que sera, sera

As the Greeks continue to deal with their economic woes, my Eastern European friends couldn’t help but dissect the genesis of the crisis. In fairness, they recognize and are grateful that the Greeks were among the first to invest in Eastern Europe following the end of Soviet rule. But as they relate very specific anecdotes about their Greek friends, I am reminded of the Italians, the Spaniards and even us, Filipinos. The Greeks love life and can laugh at themselves and their mistakes. Just like us they are among the happiest people. Not surprisingly, Greece, Italy and Spain are favorite tourist destinations – and which should also apply to PHL if indeed we get our infrastructure developed.

As I was reviewing the 2013 budget prep calendar of my friends and some of the major projects that are ongoing, I realized that these Eastern Europeans have in fact changed from when they first had to deal with the hard-charging ways that I was impressing upon them: “We’re competing with global behemoths; they don’t hold their punches.” In the beginning they thought I was coming from my corporate background while they were in their heart entrepreneurial – until they realized that to feel positive may be a great feeling yet they could in fact be falling into the trap of “que sera, sera.” It is why to be proactive is elusive; and the key is to start with the end in view.

I also have specific anecdotes of why we’ve had a love-hate relationship with expatriates in the Philippines; and it comes down to: “mga suplado sila”! They’re too task-oriented and cold – and thus heartless! And as my wife would remind herself all the time, “even my siblings think I am heartless”! Where is it coming from? For example, we like to develop our timelines of when things or events would occur with lots of optimism. [“Ay, sorry, I am late, sobra ang traffic sa EDSA.”] And we like to say that we are eternal optimists and would always see ‘the glass as half full.’ The same would apply to the Greeks; and the problem is when optimism equates to committing less than adequate resources to the undertaking – “pwede na ‘yan.”

Exporters now consider their 10 percent growth goal this year a fighting target indicating the sector’s strong likelihood to miss its goal owing to difficulties in the country’s major export markets US, EU and China, coupled with the rise of the local currency against the US dollar.” [10% Exports Growth Looks Dimmer, Manila Bulletin, 9th Sept 2012] “Sergio Ortiz-Luis, president of the Philippine Exporters Confederation (Philexport), admitted that the 10 percent growth target has become harder to sustain . . . Before, the 10 percent target was like a walk in the park, but now it is a fighting target meaning we have to do a lot of efforts and hope for more luck.”

I just had my Eastern European friends listen to the webcast of a Fortune 500 CEO whose company is outperforming peer companies as well as the S&P index. They are in the same industry as my client but are marketing in 200 countries. They have been paying dividends for over 100 years and over the last 40 years they’ve had successive dividend increases. For one thing, their flagship brand has 45% share of the global market and their gross margins are close to 60% – both elevated by industry standards. And yet one of the numerous awards they’ve received is for the work-life balance they provide their people – the outcome of the three core values the CEO consistently talks about: caring, global teamwork and continuous improvement. Of course they’ve had to overcome aggressive competition, slowing economies, devaluing currencies and even the impact of the Arab Spring, etc. given they are doing business in 200 countries.

The good news for my Eastern European friends is they’ve internalized the challenge they face and recognize they are ways away from this Fortune-500 company. But they are consciously building their inner strength to sustain their “A game” – and clearly they want to avoid the fate of another Fortune 500 company that has become the industry pariah. They’ve realized positive thinking is a must yet it does not mean que sera, sera. (The thought came to me as the Market Development Manager of one of the business units drove me, and showing off his new luxury car, to my out-of-town hotel where they have their manufacturing facility after a celebration that went past midnight: “Do you know why your friend is smiling from ear to ear? At a time when Europe, and the world, is a mess we are growing 30% this year.”)

Tuesday, October 9, 2012

Blind obedience

Does it explain why we have the least patents granted among the countries in the region? We know Thomas Aquinas – "the most saintly of learned men and the most learned of saints” and “his “Summa” is acclaimed as Christian doctrine in scientific form” [The Catholic Encyclopedia] – yet we would concede to being fatalistic in more ways than one? And not surprisingly Fr. Rolando V. de la Rosa, O.P. reminds us that “hope takes work”! [11th Aug 2012, Manila Bulletin]

Why do patents matter? Because it means that we can create things of value. Value creation is an imperative if we are to become a broad-based (inclusive, as we like to say it) and a competitive developed economy; that is to say, we need more than CCT, more than the low-hanging fruit that we’ve relied on for decades like OFW remittances and more than a consumption economy that we’re proud about. But if our starting position or mindset is one of fatalism, even a generation may not suffice to elevate us to developed-economy status? Because the status quo is akin to: "see no evil, hear no evil, and speak no evil"? And it is how, unwittingly, we nurture corruption – especially absent the commitment to the common good?

We recognize that education is thus key if we are to be an economy driven by value creation. And thankfully we are actively addressing our education challenges – and putting our money (via the education budget) where our mouth is! Yet beyond K+12 and the use of the native tongue, our institutions of higher learning must … be hospitable to an infinite variety of skills and viewpoints, relying upon open competition among them as the surest safeguard of truth. Its whole spirit requires investigation, criticism, and presentation of ideas in an atmosphere of freedom and mutual confidence. This is the real meaning of ‘academic’ freedom.” [March, 1953, Association of American Universities] And from Fr. Joaquin G. Bernas, S.J., Philippine Daily Inquirer, 2nd Sept 2012, quoting Pope John Paul II: “No university can rightfully deserve the esteem of the world of higher learning unless it applies the highest standards of scientific research, constantly updating the methods and working instruments, and unless it excels in seriousness, and therefore in freedom of investigation.”

The path of least resistance can’t be informing our worldview, precisely why our elders counseled us about Juan Tamad? We can’t face the world from a position of weakness? ["The country either landed at the bottom half of the 10-member Asean or found its performance slipping in most indicators," Philippine Daily Inquirer, 12th Sept 2012.] And we can’t be protected by the skirts of hierarchy and privilege and inadvertently perpetuate a system of oligarchy – and the lopsided economy that we’ve accepted and been resigned to?

For change to occur, social scientists postulate that knowledge must come down from the head to the heart and to the gut. We have been addressing many of our shortcomings from an intellectual standpoint – e.g., our global rankings in competitiveness and governance, among others. But for, say, corruption to be arrested, we must believe in our hearts that it’s a no-no. We can’t keep invoking compassion. A red light means stop! Those who support the former CJ are now calling for compassion thus taking the imperative of restitution for granted – the converse of what we learned in the Sacrament of Penance? We can’t be back to square-one. We can’t come ever close to establishing the rule of law and transparency and speed and predictability that the US ambassador talks about – to be an attractive haven for foreign investors – until we challenge our “paki culture”? Or have the privileges that come with our rank undercut the character-building our elders like Sergio OsmeƱa demonstrated? []

We can’t be undermining – through misplaced compassion – the foundations of civilized human institutions if we are to create a broad-based, inclusive and a competitive developed economy driven by value creation: starting with a commitment to investment that is directed to technology and innovation and education or talent and product and market development!

Thursday, October 4, 2012

If a cardinal can be heretical . . .

Why does Juan de la Cruz have to wear a blinder?

The former archbishop of Milan and papal candidate Cardinal Carlo Maria Martini said the Catholic Church was "200 years out of date" in his final interview before his death . . .” [Reuters, 1st Sept 2012.] PHL is decades out of date and not surprisingly, we are economic laggards? I have been asked numerous times: do you think Juan de la Cruz can change his culture? If that means remaining decades out of date, then we can be assured that we shall be economic laggards?

It is well known that within the Vatican there is tension and the fact that Juan de la Cruz has opted to be with the conservatives does not mean the opposing view is evil? Blind obedience was never a measure of one’s faith – as the scribes and the Pharisees had to be told?

I am back in Eastern Europe and one of the four business unit managers in my client's organization confided that her success seems to be creating tension within the company. And I thought about the debate within the Vatican – and explained that it is what “dynamic tension” is about, and it is a positive! And she would easily relate to the example because under communist rule there was no such tension – they were simply subservient and Godless. And so when the first domino fell, the rest followed suit.

We are very smart people. We know what we need to do and not be the embarrassment of the region as an economy. But we are so wedded to the past and thus move as though in slow-motion if not frozen to inaction? [The feisty Solita Monsod would call it “bureaucratic atrophy” (Philippine Daily Inquirer, 8th Sept 2012) although she like the late cardinal was talking about sexual harassment/abuse. But the reality is respect if not subservience to hierarchy comes with the other side of the same coin, i.e., abuse.]

Consider: PIDS, the state-run think tank, knows that we are deficient in investment and manufacturing – and by definition, technology. Yet we have opted to proudly trumpet the aggressive investments of the same half-a-dozen of our tycoons when our gross investment as a nation pales in comparison with regional norms. And in manufacturing and technology we’re not regional much less global players. That is not to minimize the contributions of our tycoons but to demonstrate that we are of the old-cacique school. We haven’t developed a bias for investment and technology and manufacturing, for example, because they are not the characteristics of our success model – i.e., it is one of hierarchy and monopoly which, sadly, undermines transparency thus perpetuates and accounts for our endemic corruption? (I am not also minimizing our efforts behind the uptick in our competitiveness rankings, which is laudable, yet we must keep our eye on the ‘North Star.’ And in global competition that means satisfying regional if not global investment norms, demonstrating a bias for innovation, aggressive education or talent and product and market development.)

And so while we’re pulling our best minds and ideas together to address the power issue, for instance, (and our infrastructure gaps filled and our road maps in agribusiness and manufacturing, among others, done and executed) we cannot unwittingly limit our options because of parochial cum hierarchical bias – which we mistake for patriotism? We don’t want to flirt and risk continuing to lag the region even as we pursue these major initiatives – recognizing that in the global competitive arena no one respects tradition and hierarchy the way we instinctively do? (In fairness, even among our elders there was tension: those perceived as being old school were labeled 'matanda sa una'.)

[Note: After turning my blog postings into a book I shall henceforth write in the first person]