Saturday, October 12, 2013

Why we’re still off-course . . .

. . . Despite a slew of investment grade ratings . . . “Finance Asia business editor Nick Ferguson said in a report Thursday that while Finance Secretary Cesar Purisima gives credit to "sound fiscal and monetary policy" under President Benigno Aquino III, it is the 15 million OFWs who contributed to the upgrade.” [OFWs, not gov't, lifted Phl to investment grade,, 4th Oct 2013] . . . Yet the world is dancing to a different music – beyond OFWs and BPOs. For example, “The number of large companies from the emerging world will rise according to a new report from the McKinsey Global Institute (MGI) . . . In fact we have seen all this before. In the 1970s and 1980s, Japanese carmakers began gaining global market share and, in some cases, out-competed their US counterparts. More recently, South Korea’s Samsung has weakened Apple’s grip on the global smartphone market. In the decade ahead, this type of story will play out on a much bigger scale, and the rate at which newcomers topple industry leaders will probably accelerate.” [Urban world: The shifting global business landscape, Report/McKinsey Global Institute, October 2013]
“Such up-and-coming companies could disrupt entire industries by designing superior products at lower cost, by bringing them to market faster, and by streamlining business processes. Many of these businesses, having been nurtured in difficult operating environments, are not only more agile than their counterparts from advanced economies but also prepared to invest for the long term, even if this cuts earnings in the next few quarters. Many new players will be setting their sights on expanding into international markets.”
“Our research shows that the emerging economies’ share of Fortune Global 500 companies will probably jump to more than 45 percent by 2025, up from just 5 percent in 2000. That’s because while three-quarters of the world’s 8,000 companies with annual revenue of $1 billion or more are today based in developed economies, we forecast that an additional 7,000 could reach that size in little more than a decade—and 70 percent of them will most likely come from emerging markets.”
The role of business in economic development is widely acknowledged, as in: Over 500 local and international entrepreneurs, businessmen and politicians are gathering this week at the Enchanted Farm Village University in Angat, Bulacan to discuss the power of business and solve some of society’s most pressing problems.” [Global innovators gather for summit, The Philippine Star, 4th Oct 2013]
But . . . if we pause for a bit and examine the undertakings – and their scale – highlighted in the McKinsey report, clearly they demand responses that may be beyond our comfort zone: (a) designing superior products at lower cost, (b) bringing them to market faster, (c) streamlining business processes, (c) being more agile, (d) investing for the long term and (e) expanding into international markets. Indeed the world is dancing to a different music. OFWs and BPOs are music to our ears yet ASEAN 2015, for example, calls for something much more – and something dramatically different. And we even know that 3 of our neighbors have a mind-blowing head start given that they dominate 70% of current regional trade.
And precisely because of these realities, this blog talks about “the vital few” – the requisite foundation that will bring about a vibrant industrial base. For example, accelerating the erection of such basic infrastructure as power, roads and bridges, among others, as well as rapidly developing a select few, strategic and competitive industries as in the 7 winners teed up by the JFC. It is not about social programs, for instance, that both East Germany and India tried without success. It is about a sustainable economic undertaking; and for developing nations like PHL to lift their people out of poverty, it is about reaching the scale described in the McKinsey report – or what Japan and Korea achieved in the 70s and 80s and after.
We are way off-course . . . yet we may want to take comfort in Francis, who he is showing the Vatican that change is in fact positive? It is no different from what Rizal saw in Juan de la Cruz while he was in faraway Madrid as a student and exposed to the Age of Enlightenment. The contrast between what he knew were the conditions obtaining back home and how rapidly the world was progressing made Rizal realize that Juan de la Cruz was stuck in the rut of backwardness – to the point of being anti-progress. In the case of Francis, “he promised to do everything in his power to change the Vatican's mentality.” But how does Juan de la Cruz do that? One way is to step beyond "Pinoy abilidad" – celebrating oligarchy while making do with OFWs and BPOs – and start to focus on "the vital few," for example, so that we would learn to dance to “the music of progress”?

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