Saturday, December 8, 2012

Where we stand if we pull out a GPS

The global financial system is not starved of investable funds and with more and more economies showing signs of feebleness, people in financial services, now that the era of the BRIC (Brazil, Russia, China, and India) countries is stalling, are looking at growth markets where they could park these funds. “Park” means investment is single-minded – it is driven by returns not friendship or even favored-nation status. [And while our CB folks are beaming given our elevated foreign exchange reserves, economists are livid as the peso remains fairly strong, a negative for our exporters; while our importers/retailers are salivating, reinforcing our consumption economy.] Says Euromonitor International, "[The] N-11 or next eleven are: “ Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam; all 11 countries demonstrate population growth rates above those of Western developed economies, indicating greater consumer market potential; large populations represent a wide potential pool of consumers for businesses to target, while high growth rates mean that this market will expand rapidly, providing proportionally more potential customers." How do these countries make hay?

We just did an investment guide with my Eastern European friends following the inclusion of Hong Kong and Singapore in their list of new markets. How should they prioritize investments in the Asia-Pacific region? The object is to compete and win; and that demands investing in product development and innovation and people and market development and, fundamentally, a manufacturing and technology hub. In short the ecosystem. [To prioritize, compete and win are inherent to investors. It means investing in the ecosystem (“sowing”) and thus expanding economic reach (“reaping”). It is what “inclusive” is as opposed to paying lip service]. Looking at 15 countries, from Australia to Vietnam, where do we stand? We are number twelve, ahead of India, Vietnam and Cambodia, but still in the bottom rungs. And it brings to mind why Ford relocated to Thailand and why some Japanese companies doing business in and rethinking China opted for Indonesia over us. And simply, our economic profile does not sparkle compared to many of these countries. And it is but a repeat of what we saw after 1992 (Asean integration) when we lost some MNC manufacturing to our neighbors. Our large population base is negated by our poverty levels and our fractional GDP per capita compared to our neighbors. And when one factors in our infrastructure deficiencies and the absence of an ecosystem that can support strategic industries, our economic muscle needs to be toned.

We must fix our problems . . . and fix them fast and faster! We got to do what we got to do! “What you see is what you get” is the rule of thumb for investors. Everyone knows power is a fundamental problem in PHL. We now know that tourism will take years to develop because of our infrastructure deficits. We are working on over 50 industry road maps yet the seven industry winners called by the JFC (Joint Foreign Chambers) have yet to fly, beginning with mining. [Prioritize. Prioritize. Prioritize.] And while we're pursuing export promotion and development we must likewise move beyond the nascent stage of defining what innovation is. [Practice. Practice. Practice.] Unwittingly, we are falling back on traditional exports (or our comparative advantage like bananas, i.e., we have the soil and the climate to grow them) but they don’t necessarily generate high-margin revenues as in higher value-added products – which translate to competitive advantage . . . And even Ayala Corp., one of the biggest conglomerates in the country, has been generating a negative or low income from its international businesses . . .” [Manila Times, 2nd Nov 2012] . . . And so where will our competitive advantage come from? Our MSMEs are low-cost industries and as Poland, Spain, Greece and Portugal have learned, in the 21st century world, an economy needs more than that: a nation needs to be competitive . . . which comes from moving up the innovation learning curve.

If the BRIC nations were no slam dunk, will we be able to figure out why we’ve had a “boom-bust” history? Unfortunately, it appears we’re between a rock and a hard place: the inertia to take things for granted [vested interest masquerading as love of country?] is powerful and even worse is our speaking from both sides of our mouth [do we/don’t we like foreign investments?] either because common sense [the parable of the talents?] is in fact a rare sense or closure is not us – “kuro-kuro” is us?

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