Saturday, March 16, 2013

Organized confusion

"Government urged to focus on agriculture and tourism," reads a news report. And it's a challenge for the "economic cluster" in the cabinet? There are numerous departments and agencies in government and it wouldn't be surprising, given each one has its own charter, if "organized confusion" would reign notwithstanding efforts to align functions like those involved in economic development? Take the MMDA as another example. Whatever happened to the efforts to align services and service delivery in Metro Manila? Organized confusion can take away our sense of efficiency and productivity – and no wonder progress and development has eluded us?

So what to do – beyond promoting gambling, after OFWs and the BPO? Like it or not we have to play the game of today's globalized and highly competitive world. And it demands learning to pursue the common good – the converse of oligopoly. But are our institutions, including the church, failing us? But we are the institution, like we are the church?

A Filipino business leader promoting foreign investment had shared with folks in government what foreigners have repeatedly said: "Putting up a manufacturing facility is the easy part. But the success model of our business like everyone else relies, beyond manufacturing, in the efficiency of the broader supply chain." In short, it's about (hard and soft) infrastructure once again. And that chain can go as far back to raw-material sourcing (as well as the various inputs including service-related like power that must be put into the "hopper" in order to generate the desired product or output) and as far forward as getting products shipped or transported (and ideally put on the store shelf and where the consumer has the purchasing power to take them home.

In sum, a foreign investor would assess how much of the chain can be provided and supported by a market or a country like PHL. And while few countries could take on the entire chain, investors would opt for the country that can cover the most. For example, Ford (Motor Company) figured that Thailand would be preferred over the Philippines – and so they left! It was a similar exercise my Eastern European friends did when they decided to market in Asia. Hong Kong, for instance, has only a fraction of the Philippine population and is a very high-cost location. Yet the advantages of Hong Kong as a market are unmistakable – i.e., the key is developing innovative and higher value-added products that can command healthy margins even in high-cost markets.

Efficiency and productivity (which we have to come to grips with) are critical when investors look at the bottom line. For example, it typically takes 60 minutes from the moment the plane lands at the Hong Kong airport to when a businessperson checks in at a hotel – notwithstanding that the plane has to taxi to the gate, baggage offloaded, go through border formalities, take the express train to the city and finally a taxi to the hotel (taking limousine service takes 10 minutes longer.)

And the vaunted Hong Kong efficiency and productivity – ergo, competitiveness – would be noticeable even to newcomers. Do they cost money? Of course they do, but it is not the costs but the bottom line! For an enterprise it presupposes investing in technology and innovation – e.g., with marketing and R&D working side-by-side and aggressively engaged in product development – as well as in talent and market development. It is what global competitiveness is about.

We can't be in a state of organized confusion, shut out the outside world and don't measure ourselves against a higher performance bar? The only ones it benefits are the few – not surprising in a culture characterized by influence peddling and oligopoly on one hand and bureaucratic inefficiency and corruption on the other?

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