Tuesday, January 8, 2013

Start with the end in view II

"Infra bottlenecks spending solved” reads one news report. But the devil is in the details, and another piece, "Properly prepared projects," brought that reality to life. [Mario Antonio G. Lopez, Business World, 3rd Dec 2012.] What is the object of the exercise? Until Juan de la Cruz internalizes the pragmatic dimension of the Great Commandment or the Pareto principle, we will always fall prey to crab mentality – i.e., be activity-driven as opposed to outcome-driven. Put another way, we value inclusiveness and populism at the front-end and fatalism at the backend, the recipe for “que sera, sera”? What are we missing? Take land reform. Distributing land to poor farmers satisfied our values of inclusiveness and populism. Yet it was a colossal failure. Why? An economic activity must be designed to be viable in order to be sustainable. Simply, the output must yield healthy margins for the cycle to become sustainable thus virtuous and not vicious.

I keep talking about my Bulgarian friends because that is precisely what they've learned over the last 10 years. It is not only ex-socialists (as they learned the hard way, i.e., their old system did not sustain subsidized bread rationing!) that can use the lesson. It is what makes globally competitive enterprises competitive. In another news report, for example, the Ford Motor Company is pushing the "One Ford" strategy – in order to leverage economies of scale, and realize healthy margins. [Poor countries like the Philippines can learn from the Poland experience, among others. To narrowly view the world as a low-cost environment undermines what economists call the multiplier effect of investment. A cheap-product environment consigns poor nations to poverty. It is when people look beyond – to higher valued-added products generated by an innovation culture – will economic activity reach far and wide. Industry must learn what true portfolio management is. Low-priced products can’t be the be-all and end-all if a nation is to be globally competitive. They can be part of the portfolio but the key is to incorporate truly higher value-added products to be globally competitive – and recognize Maslow’s hierarchy of human needs. Unfortunately, decades of being focused on low-priced products has robbed us of the instinct to pursue innovation. It is a similar lesson that Nokia learned the hard way to the point of adversely impacting Finland’s GDP, i.e., their low-priced focus in China/India proved globally unwise.]

Understandably, given our underdevelopment, we want to pursue a zillion initiatives but that doesn't change the reality that there are only 24 hours in a day. For example, we can’t pursue over 50 industry road maps. Not even Germany despite its engineering prowess or the US. When so many balls are up in the air dropping several of them is to be expected. The biggest hole confronting us is our very low national income or GDP which both the DTI (Department of Trade and Industry) and the JFC (Joint Foreign Chambers) rightly want to raise by $100 billion – which should move us closer to a Thailand. While the JFC is pushing 7 priority industries, we have 13 under the BOI priority investments program. And one can argue that we need all 50 industries and pursuing a 3-tiered strategy is fine. But the rule of thumb especially in the planning and execution of major undertakings is the fewer the better. And not surprisingly, it was the advice the late Steve Jobs gave to his friends at Google. The Aquino administration had already ran the 2 years of its 6-year term . . . and where are we execution-wise? And where are we after almost 70 years?

Everyone wants a piece of the action. Those who champion rural development, for example, are pushing their priority projects; and it is understandable given poverty is greater in rural communities. Why can't we then focus on the 7 JFC priority industries that include agribusiness? Even this least number doesn't guarantee completion within the remaining 4 years of the administration? For instance, the priority PPP projects are basic infrastructure concentrated in Metro Manila – and don’t directly support the strategic industries we ought to push?

That is the reality we face and our inability to focus and prioritize explains why we can't light our homes and offices or build and operate an international airport? In the vernacular, we call it “sabog”! And our sad reality is captured succinctly in this news report: "RP fails in 4 major (Millennium Development) goals."

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