Saturday, June 29, 2013

“Tradition, tradition, tradition”

From watching lots of Western movies we learned about “The Silver Bullet”? And so it isn’t surprising if we see “daang matuwid” as the be-all and end-all? And when the ‘elite class’ is talking among themselves, instinctively, they are in incremental-thinking mode (to which I pled guilty because for many years I was in that same boat)? But it also goes beyond cutting red tape, which we must; and improving peace and order, which is a mandatory. Let’s start with power, beginning with Mindanao.

There must be a better way to deal with a crisis especially a major one that has undermined PHL economic development? While we’ve spelled out our energy needs for the next few decades, we have yet to demonstrate a forward-looking perspective, if not a vision? For example, Myanmar has disqualified PLDT in their telecoms bidding process because PLDT’s experience is confined to one country. Without saying so they’ve told us: “those coming from oligopolies need not apply”? We’ve been faced with the power crisis for years . . . and comparing our mindset with that of Myanmar makes the difference stark? If Myanmar is able to take a global perspective in the pursuit of a major infrastructure initiative that impacts economic development, why can’t we? We can’t seem to connect the dots; and so populism and transactional or retail politics (which augurs well with vote-buying?) have become our operating mode? The evidence: land reform, party list, CCT, CSR, among others; none of which has really moved the needle?

There are other basic infrastructure needs that we must address, rapidly. And countries with more PPP experience have said that there are better ways to manage PPP, for example. Granted that neither power nor infrastructure is an easy challenge but then again, if Myanmar could demonstrate “quantum-leap” thinking why can’t we? And coming down to accelerating industrial development, the JFC (Joint Foreign Chambers) have presented us with Arangkada Philippines 2010. And it is another example where being in incremental-thinking mode won’t suffice? We have to look beyond ourselves to deal with these economic development challenges given the reality that we don’t have a track record? We can’t be parochial, or worse narcissistic, with generational challenges like the ones we face. The world has left us behind – so far behind that we’re talking about Myanmar . . . no longer Thailand or Malaysia. CCT, for instance, while a must-do, is in fact a stop-gap because we need a structural solution to poverty – i.e., accelerating economic development as the once Asian tigers and China have demonstrated.

While the administration, from very early in their term, have announced all those supposed pledges from foreign investors, we ought to recognize reality: we still haven’t seen any appreciable uptick in foreign direct investment (FDI). We need more than an incremental 10% in FDI; we need ten times more, not $2.2 billon but $20 billion if we are to at least match Indonesia, for example. We have teed up several areas that we believed could be of interest to foreign investors and thus are actively doing road shows; but that is just being opportunistic, similar to a cold call. For example, we are getting more tourists yet the reality is we are way behind what our neighbors have achieved because our infrastructure system is deficient. We have to take a more tough-minded stance in looking at our reality and not sweep it under the carpet. We don’t have to get all key infrastructure projects done overnight, but we could approach them with a global perspective and send the signal to the rest of the world that we are indeed doing structural reforms. But are the big boys getting in the way because incremental thinking serves their ends – as at least two legislators have revealed?

The JFC has tried connecting the dots for us: raise GDP by over $100 billion, focus on 7 strategic industries to attract $75 billion in investments and generate millions of jobs? [To simply say we must create more jobs without any foundation is plain rhetoric? “Pa pogi”?] And if we throw in energy and an upgraded PPP (as a vehicle to step up basic infrastructure building) the rest of the world would take notice? A friend, sounding as though he was singing “Fiddler on the Roof,” could only sigh: “Tradition, tradition, tradition.” It is so overpowering that Juan de la Cruz is simply helpless?

Sunday, June 23, 2013

"Wobbly political foundations"

That's from The Economist (18th May 2013) expressing their sense of our mid-term elections. Their evidence: We returned the "locked up" Mrs. Arroyo to Congress; we made another former president, Joseph Estrada, mayor of Manila "even though a court once sent him to jail for life for corruption"; elected Imelda Marcos to Congress "even though she is the widow of the most corrupt president of all." Ergo: "The durability of any reforms built on such wobbly political foundations is questionable."

And Inquirer News carried a report from Agence France-Presse, A rogues’ gallery of election winners, 16th May 2013: “Graft-tainted ex-presidents, a dictator’s unrepentant wife and politicians charged with crimes such as murder and child rape were among the winners in the Philippines’ mid-term elections. The Philippines has long endured a corrupt and violent brand of democracy in which politicians use their influence to avoid punishment for crimes, creating a so-called “culture of impunity” that enrages the masses.” And it also included “details on 10 politicians accused of serious crimes who ran in Monday’s elections. Nine of them won, according to the official tally on Thursday.”

"Pwede na 'yan," complacency and our hierarchical system and structure (collectively our culture?) would explain what The Economist interpreted as our "wobbly political foundations"? And it wouldn't be surprising if we brush that aside because the Western press does not understand the big picture or our culture?

Boo Chanco (UP naming mahal, mahal patakbohin, The Philippine Star, 17th May 2013) may have confirmed that we have the right UP president, yet the picture he painted of our premier university wasn't pretty. Is UP a microcosm of PHL and why PHL is an economic laggard? We may have the right president yet the picture of PHL isn't pretty?

If a world-renowned Harvard Business School professor, Clayton Christensen, could be critical of higher education in America, how concerned must we be? UP has been found to be lacking in partnership with industry, for example, and the reality is we don't have very many world-class enterprises that they could partner with.

My old MNC company, one of the world's largest brands and recently adjudged by a research firm to have the widest penetration of the global market even more than the world's biggest brand, has had technology breakthroughs that in more ways than one it owes to its partnership with academe. And social scientists have told industry that knowledge is not the be-all and end-all. For knowledge to contribute to man's wellbeing, it must be deployed and made tangible via the right attitude, expertise or skill and productive habits. I never understood what that meant until I realized that even world-class companies could be deficient in execution.

As Boo Chanco discussed, “Every dean, indeed every professor is a republic within the Diliman Republic.” Knowledge left in the ivory tower stays there and thus is a disservice to society? Have we in fact for decades demonstrated that we haven't turned our being the most well-informed (in the region at least?) into something tangible for the wellbeing of Juan de la Cruz? And which explains why we're an underdeveloped economy – and faced with widespread poverty?

Calling government to task

The typical tobacco farming family (husband and wife with two kids) has a half-hectare of land. They produce 800 kilos a year which they are able to sell, through the government, for an average of 3 euro per kilo. That translates to a little over $3000 in annual income, netting each family member just over $2 a day; but they are also subsistence farmers, growing vegetables and livestock for their kitchen.” [Wikipedia: The World Bank defines extreme poverty as living on less than US$1.25 (PPP) per day, and moderate poverty as less than $2 or $5 a day. But note that a person or family with access to subsistence resources, e.g. subsistence farmers, may have a low cash income without a correspondingly low standard of living – they are not living "on" their cash income but using it as a top up.]

Driving around the Balkans recently, I again noted the wide expanse of farmland which has always intrigued me, beyond Greece and into Bulgaria. The area was known as “no-man’s land” during the Cold War which literally meant “you will be shot," if you set foot. The region is also known for grapes and tobacco. And today they have a popular wine: “No Man's Land” – and in the back label they explain its origin. But apparently we were in tobacco land; and just outside one restaurant, there were people (farmers, we would learn) indulging in 'rakia' while kids were romping around the solitary fountain in the village square. [Wikipedia: Rakia – it is a popular beverage throughout the Balkans; its alcohol content is normally 40% ABV, but home-produced rakia can be stronger, typically 50% to 60%.]

As we approached the restaurant we greeted the folks in their language and straightaway they invited us to join them. I could throw around a dozen words in their language and that was enough to be the center of attention. And in no time there was a young American Peace Corps volunteer who arrived. [In a small village of 3000 the presence of new comers spreads like wildfire which would explain how the young American heard about our group and came over.] He hails from Ohio and was completing his two-year assignment and was looking forward to get to Washington State to pursue his graduate degree. He spoke the language fluently: “Four months of intense language training, five hours a day.”

When the American was describing how a typical farmer’s home looks like, I realized these farmers did not exactly have a low standard of living, recalling how the World Bank defines poverty. “The typical kitchen is no different from what we have in the US. They are prudent so they make their own bread but using a modern-day bread-maker. They have microwave ovens; they have running hot and cold water, washing machines and even western-style bathrooms. They make their own ‘rakia,’ yogurt and strawberry juice. They make heavy breakfasts from corn, understandably because of the long hours they spend in the farm. And from experience, they can tell when rain is coming.”

They have no expectations from government. These are generational farmers and whether it was the Ottoman or Communist rule or their current democratic system, life to them is the same. And like everywhere else, some kids would decide to pursue higher education or migrate to the West. But it still is a small village. And so everyone would know where all the kids have gone: those who earned graduate degrees or worked for MNCs, etc. I did not hear about religion although the couple of villages we saw had mosques. “They date back to the Ottoman rule, but religion is not top of mind.” And since it was springtime, the days were longer and as we walked around the village everyone was waving and making us feel welcomed.

There were a couple of schools and the paved roads were limited to the area around the center. And beyond were dirt roads. (They would remind me of the days when my neighborhood in Manila was largely “looban” before the roads were laid out.) Do they need government? Admittedly, this is an old country and 20 kilometers from the village is a town that seemed to have everything, including chic boutique shops for women – Europeans would be Europeans! But in fact they forced the government to resign and call an election following protests against corruption. Is there an assurance that they would get a better one? No. But these people have demonstrated resolve – with seven of them committing self-immolation. They’re a tough bunch! They don’t take things sitting down! I would tell them about Rizal, who didn't take things sitting down too!

Friday, June 21, 2013


Unwittingly we would seem to succumb to “pwede na ‘yan”? For example, we know that without infrastructure tourism efforts will yield sub-optimized results. Is "unacceptable" in our vocabulary? It is tough-mindedness that separates winners from losers. And it doesn't get any better when we add our deference to hierarchy and assume that capital is the be-all and end-all, and forget that the foreign exchange reserves that got us the credit-rating upgrades come from OFW remittances – not our industry per se? Simply, we are not starting from a position of strength?

Thus, if we are to sell PHL as “a product” to attract foreign direct investment (FDI), for instance, we need more than “daang matuwid” and investment-grade ratings. Just like in tourism, to attract foreign investment we need infrastructure. But not only: we need an ecosystem that can translate capital into tangible competitive products that will be sought by the bigger global market. And “Arangkada Philippines 2010” is a good model to build on. Economic planning is more complex than business planning and if the latter demands lots of prudence in order to raise predictability and lower uncertainty, all the more the former? We may in our hearts believe that we are better than the Indonesians, but the level of FDIs we attract compared to them is in fact pathetic? If our best efforts have yielded $2 billion (or, say, we do 3X more) in a year, and they generated $7 billion in the last quarter alone, how should we react? “Pwede na ‘yan”? Or "unacceptable"?

We may have the best people doing the road shows to attract foreign investment, but it is not the singer but the song! It is the product! It means that PHL has the infrastructure and the ecosystem to turn investment into competitive products and services sought by the bigger global market. That is when investors will come knocking at our door. “Pwede na ‘yan” is never enough? [It is fundamental to do an income statement prior to a marketing campaign locally and/or globally. A “boondoggle” or a junket is unacceptable! Simply, opportunistic marketing is unsustainable especially when it is not the outcome of an integrated product initiative that is founded on value-creation (perceived by the user) through innovation – in order for the product to be highly competitive.]

A foreigner-columnist who claims to love PHL gave the quality of our newspapers a dig, specifically their news value. It brings to mind the Wall Street Journal with their Editorial and Op-Ed pages unabashedly committed to the conservative agenda. But still, the news value of the rest of the paper is worth the paper it is printed on. Looking back, I would include myself in our failure: of reinforcing the complacency of Juan de la Cruz. For many years I read our local papers from the standpoint of the elite class and thus was in incremental-thinking mode – and parochial. I was more concerned about the menu and the quality of the food in the country club in our gated community, for example, but not the decline in the competitiveness of PHL which was happening before my eyes – as I covered the region wearing my MNC regional manager’s hat, and a witness to the development efforts being pursued by our neighbors. I was a “proud Pinoy” – believing that Filipinos were better informed. "Unacceptable" was yet to find its way into my vocabulary.

When I was still based in Manila, a foreigner-friend commented that I was not living the life of Juan de la Cruz because my car had the stickers of military camps and gated communities that allowed me to cut my commute time. Of course, my driver and I would brush that aside; he did not understand our culture. Simply, I was not Juan de la Cruz. I was higher in the hierarchy and thus exempt from "pedestrian rules," if not above the law. Not surprisingly, columnist Rigoberto Tiglao, Manila Times, 9th May 2013 picked up Jillian Keenan’s “The Grim Reality Behind the Philippines' Economic Growth,” The Atlantic, 7th May 2013. []

It is refreshing that President Aquino was apparently candid: “We’ll have to be able to prove that this is not cyclical, or a temporary aberration,” President Aquino said in an interview . . . on the country’s economic revival. “We’ll have to be able to do it year in, year out.” [Bloomberg News, 9th May 2013] “His point was illustrated when the lights went out during the 90-minute meeting at MalacaƱang in Manila, as the nation’s capital suffered a major power failure.” Absolutely, "unacceptableI"? But it has yet to find its way into our vocabulary?

Thursday, June 20, 2013

The challenge of bureaucracy

Are we finally on the right track? “The Aquino administration has approved a budget ceiling of P2.27 trillion for 2014, 13.1 percent higher than this year’s P2.01 trillion as it aims to sustain rapid and inclusive growth.” [Gov’t sets P2.27-T budget for 2014, The Philippine Star, 6th May 2013] “Its main focus is to expand transport and energy infrastructure, pursue tourism development, revive the manufacturing sector and enhance the assistance to small and medium enterprises for more to go up the value chain and allow them to multiply. The government also intends to promote greater agricultural productivity and higher farmer incomes. It also intends to ramp up infrastructure spending as a ratio of GDP from 2.6 percent in 2011 to at least 5-to-6 percent by 2016. The government intends to adopt a coherent and efficient intermodal transport roadmap, connecting employment-creating areas such priority tourism destinations, agricultural and manufacturing production hubs.”

But then, bureaucracy creeps in? “The Department of Finance (DOF) has put its foot down on the grant of incentives to most if not all preferred industries being proposed for incentives eligibility under the 2013 Investment Priorities Plan (IPP) and urged the granting of tax perks to export-oriented enterprises only.” [DOF wants to limit tax perks to export projects only, Manila Bulletin, 6th May 2013] “DOF’s position is tantamount to scrapping the IPP . . . IPP is for preferred economic activities that are geared for the domestic market . . . Unless the law is amended, you cannot do that . . . EO 226 was issued in 1987 by then President Corazon Aquino and has not been amended since then . . . The DOF, however, has always been wary about granting incentives to investors because this would cause additional drain to the government coffers . . . [T]here is no foregone revenue because there is no investment yet.”

At first glance it appears laughable, “a classic case for adult supervision" – i.e., the left hand does not know what the right hand is doing. Yet even the private sector falls into the trap; and as I’ve said in this blog, my claim to fame in my old MNC employer is moving the budget drill from a principally financial exercise into a goal-alignment process. And wasn’t the creation of the economic cluster within the cabinet precisely to get goal-alignment instituted in government service?

This is not the first time that the DOF has pronounced the primacy of tax collection. Indeed we have a problem with tax collection but we also have a problem in being an underdeveloped economy. And as such, our national economic output or GDP is minuscule to begin with – and thus the tax base would be pretty limited. It mirrors the tension not uncommon in private enterprise: the financial folks would push cost reduction because they question the optimism behind the sales targets set by their commercial counterparts. And it comes from linear-thinking or when everyone thinks they are being logical by starting from step-one. And which is why this blog has repeatedly talked about “starting with the end in view.” And thus has praised the efforts of the JFC (Joint Foreign Chambers) behind “Arangkada Philippines 2010.” It spells out the endpoint of raising our economic output or GDP by over $100 billion and it starts with investments of $75 billion focused on 7 priority industries that will generate millions of jobs.

If there is an effort to align goals within the government bureaucracy in support of Arangkada, for example, then the economic managers would want to connect the dots presented by the JFC by: (a) figuring out the various mechanisms to turn the vision of Arangkada into a tightly-knit plan and then (b) driving execution? The equivalent in the private sector is: (a) creating competitive products relevant to the 21st century consumer and her wellbeing (and this blog often discusses the elements of competitiveness: investment, technology, innovation as well as the development of talent, products and markets); (b) turning up the power of the products via the requisite and integrated marketing mix or elements; (c) employing the resource imperatives; and (d) pursuing dogged execution.

Understandably that will be too much to chew for the public sector. The reality – given our inward-looking bias – is that PHL private sector is yet to meet the above imperatives of global competitiveness as well. And thus those shortcomings (which can't be overcome by CCT nor CSR) of our ecosystem would explain why we’re an underdeveloped economy – and faced with widespread poverty.

Saturday, June 15, 2013

Our slip is showing

When "PLDT failed to pass the pre-qualification process for the two telecom licenses offered by Myanmar" [Manila Standard Today, 13th Apr 2013] was Myanmar telling the world that they wanted to play in the 21st century globalized arena? "The PLDT group had a tough time in pre-qualifying for the bidding because of the group's limited international operation. On our own we cannot, because the requirement of Myanmar is that to prequalify you must have operations under your control outside your home base."

Google Myanmar and it says: “Government – Military regime". A military regime is showing PHL supposedly a market economy for decades what a market economy ought to be – especially in the 21st century? Unfortunately, since the PHL economic model is largely characterized by oligopoly, even our major enterprises can’t measure up to the imperatives of the 21st century? The evidence: we are the first to complain about the services we get from our telecoms industry. And so given that in the Philippines dominant entities can flex their muscles – e.g., access to capital – and enter into businesses where they bring no competitive advantage, we may assume that they can enter a business that they know most especially in another country? Unfortunately, in the 21st century, "knowing a business" does not equate to bringing competitive advantage – which is imperative to sustain the business over the long-term and be patronized by customers because it is trustworthy and reliable, for example. Competitive advantage presupposes, beyond capital, investment, technology, innovation as well as developing talent, products and markets – precisely why Myanmar had its pre-qualification requirements?

Our paradigm has yet to shift to 21st century mode? Does being parochial and hierarchical – that nurtures our system of oligopoly – explain why we lag the world? First it was Thailand, then Vietnam and now even Cambodia is able to show us the way in farming, for instance? And Myanmar is doing what we can't seem to do with our power crisis? For example, why can't we open (like we did with gambling) the power industry to the world when its backwardness (owing to protectionism or shortsightedness or incompetence or all of the above?) has undermined our economic growth and development? Very soon Myanmar would have better telecoms and Internet services than we do?

We’ve been several times in the past voted as the next tiger. Has that ensconced us into our comfort zone? When I was a boy I learned that PI (as we were called then) was a promising young nation and I witnessed our "looban" (in the 3rd district in Manila) being bulldozed as streets were being laid out. And as I joined my old MNC employer years later, that promising-nation label remained and we hosted lots of regional meetings in Makati hotels. And given Pinoys were perceived as better informed, I personally gained from that positive image, and was given a regional role. Our board of directors even held its first ever meeting outside New York in our local offices as a vote of confidence and optimism. And as one senator more recently said, “Been there done that”!

With the signing of the ASEAN integration over 20 years ago, I got involved in organizing regional hubs; the president of the company who had called PI Shangri-la was surprised that the objective assessments made by our team showed how far advanced our neighbors were and how much the Philippines had fallen behind across several critical factors, including infrastructure. And sadly, that reality was replayed recently as my Eastern European friends worked with me to prioritize their entry into the Asian market.

Given how far behind we are in progress and development, we need a lot more than investment-grade ratings. In other words, trickle-down works if the ecosystem (as discussed above, especially infrastructure and competitive advantage) is able to efficiently turn capital into competitive products and services sought by the bigger global market. We won’t get ever close to that realization if we don’t get it cracking. And if Bernanke can't get the US economy off its lethargy, our Central Bank's monetary role either won't suffice – despite our enviable foreign exchange position.

And in the meantime, or until Juan de la Cruz wakes up to reality, indeed we need prayers – but not only . . .  

Wednesday, June 12, 2013

From the horse’s mouth

I was introducing lateral thinking and my Eastern European friends were amazed when I related that “I heard it right from the horse’s mouth in Manila when I was still wet behind the ears.” [Anacleto del Rosario, my mentor, and considered the first Filipino marketing consultant, brought Edward de Bono to Manila in the early 70’s. May he rest in peace! And recently Business Mirror had this article: Great innovators think laterally,” Ian Gonsher & Deb Mills-Scofield, 28th Apr 2013. []]

Because the logic was straightforward, my Eastern European friends quickly picked up the imperative of raising margins. And they thought that reducing costs was the answer. That is important and so is raising efficiency. But if a product is trapped in a certain “image and pricing,” cost reduction and efficiency could only go so far. I thought they needed to revisit the fundamentals of marketing. Here was a bunch of creative and great-quantitative folks and I wanted them in the classroom to learn something they thought they already had first-hand knowledge. They could talk product segmentation but, unfortunately, their brands were trapped in their narrow segments.

To set up the discussion on lateral thinking necessitated pulling out Maslow’s hierarchy of human needs – to get them away from the classical marketing theory that a segment is targeted to an income group. [Many have heard the Nokia story: they dominated the high-volume basic cellphone segment because of China and India, but it undercut their margins to the detriment of the company and the country, where Nokia’s revenues and those of support industries were an appreciable piece of GDP.] “Our consumers are poor Bulgarians.” And so I asked, “How many of you have smartphones?” And most of them raised their hands. “And who wears designer jeans?” Again, most hands were raised! “We will move from segment-thinking to category-thinking; and that is how we would learn lateral thinking. We will do several exercises; meaning, we will not get there overnight – because it is counterintuitive.”

Today lateral thinking is part of the company. But it was a long journey. After training them in marketing and product development and innovation, they had to be trained in selling. And to “drive the solutions through to completion” I had to manage the sales force for two years. “[M]anagement consultants figure out the solutions and generally leave the implementation to others. I wanted to help drive the solutions through to completion,” Robert Musslewhite, “More than problem-solving,” The New York Times, 27th Apr 2013. In the beginning I would come for a month and leave them with several pages of what I considered solutions – with the expectation that they would follow-through with the implementation. They were very smart people and their facility with numbers could stand up against the whiz kids I’ve worked with in New York. They were logical thinkers. And I thought they were even more creative and artistic than typical brand managers in the US, impressed by their product packs when I first saw them. Yet, they would be unable to implement solutions for which I had provided “next steps,” in typical consultant-speak.

If I learned how to construct a business or a financial plan from my grandfather and lateral thinking in Manila, what then did I learn in the West? In one word, I learned execution – which comes from tough-mindedness. And that could be what is holding us back, Filipinos. We simply can’t be tough-minded? We are holistic in perspective and thinking to the point of being caught in analysis-paralysis? And even before that we struggle to objectively define a problem; again, because of our bias for inclusion – fearful of leaving something or someone behind? We have yet to internalize the 80-20 rule?

We’ve invited so many contemporary thinkers like de Bono in the early 70’s, and countless more over the years. And yet our inability to move the country forward would indicate that we can’t execute because we are too nice, not tough-minded? Poverty has been staring us in the eye? What to do? We think road shows overseas would sell our products or get foreigners to come and invest? They want to see tangible things get done like power and infrastructure; and they like to see us move from parochial- to global-thinking. We’ve been doing road shows overseas for decades. But that is still inward-looking – or “pa pogi?” Understanding what the consumer needs means reversing our thought process, i.e., to be outward-looking, not parochial. It is not about what we offer but what they need; and that is what we must respond to. 

Sunday, June 9, 2013

I learned it from my grandfather

"You're happy with the bottom line but not the top line?" The fellow didn’t then ask: "When will you ever be pleased?" Instead: "That must be the discipline from your former (MNC) company?" And I said, "I learned it from my grandfather when I was a boy!" [But I’ve also asked them to listen to webcasts of “Earnings Call" of select Fortune 500 companies.] We recently completed the business reviews with my Eastern European friends and every country and business unit was updating their respective plans and budgets for the balance of the year. They know the drill: (a) product plans are pronounced truly competitive in their respective markets; (b) resources moving forward locked in; (c) then execution with a BIG E. Especially countries in the top 20% that will deliver 80% of the results.

After reading the news re PHL poverty and competitiveness (or the lack of it), I looked up two Philippine companies (in the consumer-goods business) that recently reported earnings. If these businesses are to be globally competitive they must deliver double-digit profits! And given that global investors have a wide range of options, they wouldn't be predisposed to bet on these companies. Over ninety percent of Philippine businesses are SMEs. And if even prominent companies don't meet global profitability yardsticks, SMEs, given less resources, will indeed only account for 30% of GDP. There lies our problem, of our widespread poverty – i.e., their ability to grow and thus create jobs is limited. If major companies and SMEs are not pulling their weight in the economy, then indeed oligopoly shall dominate. Ergo: our lopsided economy will be a permanent fixture so long as our SMEs and well-known enterprises are no panacea.

One hundred million Pinoys is a big market, but Indonesia is even bigger with a larger GDP per person to boot. Conclusion: our big population has been negated by Indonesia and no wonder the FDIs (foreign direct investments) they attracted ($7B) during Q1-2013 would dwarf what we do in one year ($2B). Beyond sheer numbers, we need to raise our output if we are to leverage population, like China did.

An undertaking must be designed to be sustainable if it is to make sense, so said my grandfather. And decades later his wisdom is still a big boost to my Eastern European friends. "Rumen and Vladi just called from Istanbul, our new partner just signed up to sell our products in Turkey. You will be happy with both the projected top line and bottom line. And we are already shipping to Lebanon, and my group is also working on the countries we talked to you about." They were a bit jealous that I was with the new Asia team that traveled around the region and was even part of the negotiations. But they also know that Asia is the bigger opportunity – and understand the 80-20 rule.

So how do we in PHL fix our problem? First, do we believe that we must be an egalitarian society? And do we believe that we must shed our parochialism? These are the two most critical commitments we must make otherwise we can just be in la-la land? If we are committed to be egalitarian and global, then the rest would follow. Is this where the church ought to focus – because that is in fact at the heart of Christianity, i.e., respect and brotherhood of people, including our muchachas and muchachos? We are parochial because at home we are royalty? And it follows that our economic model would be skewed to oligopoly – to keep our rank and its privileges? Ergo: we shall indeed keep the economic barriers up despite PHL's dire need for foreign investment. [No wonder the cement industry is critical of our energy-protectionism?]

In the meantime, the business model of our enterprises can't be about making cheap products. Because we Pinoys care for the poor, do we find that virtuous or is that a marketing strategy that in fact falls short of global profitability metrics? The 21st century is about developing products that understand the person of today and tomorrow and their wellbeing. And which is why Edison, Jobs and Gates are the models. The object is to attain the confidence (it applies even to SMEs) and the ability to price products and generate healthy margins – and to aggressively invest in R&D, product development and innovation as well as in developing talent and markets. Understandably that is a lot to chew for Juan de la Cruz. But if we want an alternative to a lopsided economy – that is dominated by oligopoly – and raise the capacity of our enterprises to grow and create jobs, we have to learn what it’s like to be egalitarian and global? We must be equal to the task – we really don’t have a choice?  

Thursday, June 6, 2013

Good enough is never good enough

“This business is fun!” I kept saying it to my Eastern European friends. And at one point they wondered that if this was a fun business, why I was pressing them to raise the bar? As they got to learn the business more, they realized that the fun comes from winning. And that if we had to win, we had to keep raising the bar – good enough is never good enough.

And to remind them about the constancy of raising the bar, I shared a recent article (and subtitled it "A great Lesson in Selling") from Maureen Dowd of the New York Times, “No bully in the pulpit,” 20th Apr 2013: How is it that the president won the argument on gun safety with the public and lost the vote in the Senate? It’s because he doesn’t know how to work the system [doesn’t know how to sell – commentary supplied.] And it’s clear now that he doesn’t want to learn, or to even hire some clever people who can tell him how to do it or do it for him.”

It was a glaring example of his weakness in using leverage to get what he wants. No one on Capitol Hill is scared of him [he has no credibility – commentary supplied]. . . Then, as usual, he took his foot off the gas, lost momentum and confided his pessimism to journalists [ergo: cannot ride a momentum – commentary supplied] . . . The White House had a defeatist mantra: This is tough. [Lacks training in selling: beyond knowledge, he needs the requisite positive attitude demanded of selling, the right skills and the earnest habits of a winner – commentary supplied.] We need to do it. But we’re probably going to lose. When you go into a fight saying you’re probably going to lose, you’re probably going to lose [lose the brand, the market, the business – commentary supplied.]

The White House should have created a war room full of charts [sales management is information management – commentary supplied] with the names of politicians [or direct and indirect customers or regions or stores or buyers – commentary supplied] they had to capture, like they had in “The American President.” Soaring speeches have their place, but this was about blocking and tackling [like in American football – commentary supplied].”

The president was oblivious to red-state Democrats [or unfriendly customers and buyers – commentary supplied] facing tough elections” . . . “How can we make this a bill you can vote for and defend?” [Buy him coffee or a drink or whatever – commentary supplied] . . . “Heidi, you’re brand new [you need our outstanding brands and marketing support – commentary supplied] and you’re going to have a long career [and generate returns – commentary supplied.] You work with us, we’ll work with you [and generate even more – commentary supplied.]

The president said the Newtown families deserved a vote. But he was setting his sights too low. They deserved a law.”

And that is the bottom line: This blog has consistently praised President Aquino’s “daang matuwid” but the object and premise of the blog is to challenge Juan de la Cruz to reinvent himself. And that means we have to keep raising the bar. Investors are looking at us but we can’t take that as the be-all and end-all. And which is why international institutions have been busy giving us unsolicited advice. The worst thing we can do is to be narcissistic – “pa pogi”. We have to toss “pwede na ‘yan” – because good enough is never good enough. The good news is the administration said that they would focus on infrastructure, agriculture and tourism. That sounds good. They could then demonstrate the leadership, the focus and the priority? And use the bully pulpit to get PHL to raise the bar – and not be ensconced in our comfort zone?

Monday, June 3, 2013

Why we’re amazed is what’s amazing

"Poverty unchanged despite economic growth," screams a news report that represented the headlines of the day, 24th Apr 2013. What is amazing is why we're amazed! Have we been led to believe that we should expect something different? Given that our GDP per person is a tenth that of developed economies, it would take a generation for PHL, at a constant 7% growth (at current prices and exchange rates), to be a developed economy, as international institutions have indicated many times before. And they have not been shy giving us unsolicited advice? But Juan de la Cruz is simply stubborn – “matigas ang ulo”?

And perhaps to keep our sanity, we like to look at the glass as half-full – when the unfortunate reality is it is 10% full and 90% empty and that’s how deep a hole we’re in? And so one local paper has been constantly drum-beating every effort that it picks up from the positive side of our ledger. But as one senator once said, “Been there done that” – we would register some good growth but have yet to sustain it?

My late mother trained to be a teacher unlike her father who was a CPA; so I would try to explain to her that revenue has to be netted out because of the attendant expenses; and similarly an asset has to be discounted by any liability. Juan de la Cruz can’t just all be “pa pogi”? As a boy I would hear my grandfather remind his oldest son, who was a forester and worked at a government agency extending agricultural credit, that subsidies would make sense if the underlying undertaking was designed to be sustainable. It was the first time that I heard the word subsidy and I had no clue what they were talking about. But looking back, he in fact predicted that land reform would fail! And it was after one of those Sunday lunches when this conversation occurred that my grandfather then said to me: "Don't be a politician because they steal, and don't be a lawyer because they lie." [A high school graduate, he never took up accounting but sought to be allowed to take the board exam, passed it and became a CPA. He looked up to Rizal and was a Mason, but his children were all baptized Catholics, my grandmother being one.]

I am today the least surprised when candidates would promise to fix the economy. The reality is we are perpetuating our “cacique culture” – a hierarchical system and structure? I could only cringe to hear hushed comments on the extent vested interests are funding our elections, clearly no different from the US – and why like an American Jesuit who is a Manila resident, I haven’t also exercised my right to vote in US elections. [Freedom works both ways; and in developed nations it’s not surprising to find a lower percentage of voter-turnout – “fool me once you are a fool, fool me twice then I am a fool”. I hold dual citizenship and can vote in PHL elections too.] But there is one glaring difference: the US can fool around and get away with it – but PHL can’t. (Although the display of hubris and greed by the financial sector appears to have inflicted so much damage that the world is still reeling from the Great Recession.)

Indeed we can’t. But because we like to cling to what we call our culture – largely driven by parochialism and a hierarchical system and structure, i.e., the cacique culture – we can’t put the basics of nation-building or the foundation of an economy right? How out of synch are we from the 21st century world to crow about OFW remittances, for example, when we should abhor it? But because of our “caste system” we don’t even bat an eye? (With due respect, Cardinal Tagle did when he was archbishop.)

We could decree that gambling can be an open field but not energy, as an example? But we’re now stepping up infrastructure – yeah, great, but with the same half-dozen big boys sharing the spoils? But we have lots and lots of small businesses – to the extent of 90% of businesses. Again, great! But they only account for 30% of GDP – because we don’t measure up to the yardsticks of the 21st century globalized, competitive world. We are way behind in investment, technology and innovation as well as in the development of talent, products and markets.

Simply, dominance and oligopoly equals a lopsided economy – and precisely why talk of inclusive growth is mere rhetoric?