Thursday, February 7, 2013

Overcoming the law of averages

As the Aquino administration marches forward it is being confronted with the law of averages. And as media reports on its play-by-play performance we see reality playing itself out. For instance, while missions to the Philippines by potential foreign investors are on the rise as well as our trade missions to other countries, pundits have asked: “Show us the money?” Indeed we must get our fair share of foreign investments and revenues. It's a New Year and we all want our favorite initiatives, yet the administration ought to focus and prioritize.

It can't overnight erase the restrictive economic provisions in our constitution nor the culture of corruption that President Aquino has waged war on. Still, there is the imperative to raise the bar – investors don’t give currency to “pwede na ‘yan”? Our energy master plan remains a work in progress because Juan de la Cruz hasn’t demanded a concrete coherent solution even after legislators revealed that vested interests have been defending the status quo. And so instead of a “dynamic PHL” we’ve remained the “status quo PHL”? And sadly while it has undermined the economy hand-in-hand with Juan de la Cruz, the industry is in celebratory mode; and to add insult to injury, key players are lionized thus perpetuating local lords? The PPP remains closer to a game plan and is yet to get into the rhythm of things. The road map for agri-business (including fisheries) is still a road map. And while it appears we now want to focus on four major industry groups in 2013 to appreciably raise economic output, the prognosis remains at the level of export targets and GDP projections that will result from numerous elements and initiatives. What is missing – or probably not reported as news? Who will do what, when, where and how?

How much investment are these industries committed to? What technologies will they acquire and where, and what innovations will they pursue? How much employment will they generate and what skill-sets will people learn? What new markets will these industries develop, what are their sizes and how much share do we realistically expect to take? How does that translate to incremental economic output over what period? The Department of Trade and Industries and the JFC (Joint Foreign Chambers) have rightly set a goal of over $100 billion, and that should bring us closer to a Thailand. But that will remain just a goal until we respond to the foregoing challenges. Our local market may be big but 100 million Pinoys after discounting our income and poverty levels don't represent the true market.

We have to seriously revisit our assumption that a big local population is sufficient to raise our economic output several times fold – and which we've euphemistically labeled “consumption economy”? That comfort zone is undermining our instincts of innovation especially when the local market has been characterized as “pwede na ‘yan.” Instead we ought to demonstrate Pinoy creativity and step up to global competition. It will take a different worldview if we are to gain that confidence but we won’t . . . if we don’t commit to investment accordingly, especially in technology and innovation.

Isn't Juan de la Cruz predisposed to investment and which is why the Chinoys have become the pillar of our economy? Our bias can't stay with rent-seeking that would characterize the handful of conglomerates that dominate our economy? Whether it is retail or housing or even services geared for the local market, our economic pie shall remain small relative to our population until we inject a new dynamic.

Of course we must feel positive that we grew at over 7%, but that was from a low base and a low GDP per capita. We don’t want to be lulled by the law of averages, we must confront it instead. Our major enterprises, successful as they are, are still driven by OFW remittances and of late by the BPO industry, enough for analysts to make bullish projections. Yet our economic pie remains small; and so we have to resort to CCT and CSR, for example. Indeed we must raise the bar. But first things first: focus and prioritize.  

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