Tuesday, November 26, 2013


Google translate: it’s Filipino for coherence"Manila Bay Resorts to provide thousands of jobs," proudly announced a news item. It’s good news, but is there a catch? Didn’t the World Bank share their findings that our economic model doesn't create the number of jobs we need, not now and not in the foreseeable future? They’ve presented us a new paradigm, i.e., pursue manufacturing? How must we respond? The US bishops, meanwhile, had to do some rethinking given the new paradigm from Pope Francis. And it shouldn’t be surprising if we recall how Einstein defined insanity?

"This focus on the rural poor has, ironically, been one of the major obstacles to alleviating poverty. For decades the national political parties handed out lavish subsidies for work, food and energy – among other things – thus distorting all these markets and perpetuating many of India's basic economic problems . . . [T]his mentality has taken precedence over good governance, efficient regulations, and fiscal sanity. Policies that actually alleviate poverty by promoting economic growth are often enacted quietly and are even guiltily called "stealth reform" by their advocates . . . [T]he political elite still think of India as . . . a victim of larger global forces than . . . one that should be governed by the highest standards . . . Many foreign observers . . . look at India with despair. The country simply cannot reform at the pace necessary to fulfill its ambitions for growth and progress. Everything gets mired in political paralysis, and the governing class remains committed to a politics of patronage and pandering . . . Can the country live up to its potential? Are Indians reformers? Can millions of people mobilize and petition and clamor for change? Can they persist in a way that makes reform inevitable?" [Fareed Zakaria, The rediscovery of India, McKinsey & Company, 19th Nov 2013]

Sounds familiar? Four self-imposed barriers have cut Juan de la Cruz by the knees? They are: (1) The restrictive economic provisions of the Constitution; (2) Failure to address the power crisis; (3) Neglect of basic infrastructure; and (4) Bypassing industrialization. There are other barriers that when added to the above have kept us economic laggards. For example, our hierarchical system and structure has reinforced paternalism and populist demands on the one hand, while perpetuating oligarchy and oligopoly on the other. And the hopelessness they bring drives fatalism and learned helplessness – with the church offering its shoulder to cry on? What about education? If all the foregoing would define our culture, doesn’t education in fact mirror a nation’s culture, such that our paradigm would remain outdated and passé?

In the globalized 21st century, enterprises and nations compete for resources and markets. And their ability to be in the arena is dictated by their infrastructure, in the first place? Simply, without infrastructure, they are less able to attract investment and tap technology, both critical to industrialization and in the pursuit of progress and development? And there is still the requisite education and training that must be equal to the demands not of yesterday but of tomorrow, including competitiveness? What about sophistication? Sophistication is what people saw in the palaces and the lives of Europe’s royalties? It is in the wines that Europeans drink. Yet Einstein defined education not in terms of sophistication but as the training of the mind to think – and not even the learning of many facts!

Foreigners, including experienced foreign-service personnel and journalists, would immediately sense the sophistication of Filipinos. It isn’t surprising because back at home in the West, these are middle-class folks. It was like yesterday when I was on the phone at home in Connecticut talking to the country manager of an Asian subsidiary and he thought he overhead my wife’s voice. Not to worry, I said, she was just reminding me to take out the garbage before I retire.

“The United States is a middle-class society. Most of the country considers itself middle class, and politicians cater to that vast group . . . In India, politicians have generally pandered to the villager . . . Village life in traditional Bollywood movies reflected simplicity and virtue. Cities were centers of crime and conflict, controlled by a small, wealthy, often debauched elite.” [ibid.]

Can coherence exist in a hierarchical system when transparency is absent by definition; and evidence number one is the Vatican? Despite the holiest of objects the absence of transparency has resulted in embarrassments, not coherence, within the church? While in PHL, we want to preserve an old paradigm (which we insist reflects our values?) while expecting a different outcome? Fatalism or insanity?

Monday, November 25, 2013

The Filipino and the human spirit

“It is depressing to witness, and at times it seems that the only uplifting images and affirmations to arise from such scenes, which continually accrue in our historical memory, are those of the unconquerable Filipino spirit—images of full basketball games carried on in waist-deep water and of a man joyfully tearing through a street intersection on a jet ski, and the now ubiquitous slogan “The Filipino spirit is waterproof.” These are moving, and are a testament to the fact of our geography. But, they also turn what is gross government irresponsibility into a virtue, and pointedly underscore the ways in which suffering in the Philippines falls disproportionately, if not exclusively, on the impoverished.”

“The National Capital Region weathers its share of disaster, but as a resident of Dasmarinas Village, I wish to take the license to pose a polemic counterfactual. What would our national policy look like if Dasmarinas Village or Forbes Park were the areas destroyed on a yearly basis? Would we cheerfully send each other images of us playing full basketball games in the Forbes Park court in waist-deep water? Would we tell one another that the “Filipino spirit is waterproof” and fail to invigorate national disaster prevention policies? The Filipino spirit is indeed waterproof, but without the certainty of yearly destruction, disproportionate suffering, entrenched inequality, and government irresponsibility, it could also be far more.” [Nicole Del Rosario CuUnjieng, a PhD Student in Southeast Asian and International History at Yale University, Do not say that the “Filipino spirit is waterproof,” The Manila Times, 17th Nov 2013] I couldn't have said it better.

Rizal had posed such polemic challenges while he was studying in Madrid; CuUnjieng is doing it from New Haven. If I had a wish, if or when Ms. CuUnjieng is to come home, that she would continue challenging Juan de la Cruz. This blog will be five years old, and wherever I am in the world I would get on the internet to do my postings. My inspiration: my Eastern European friends. They’ve truly demonstrated the sense of purpose that I thought they had and why I’ve been holding their hands the last ten years, and counting. “There is no barrier that you will encounter that hasn’t been conquered before. The world wasn't invented yesterday.”

“The EU may still be fumbling but that doesn’t mean you have to be in the same boat.” Indeed, the last five years, the period of the economic slowdown especially in Europe, was their best ever in their less than 20-year history. And notwithstanding that enviable run, they’re poised to outdo themselves. They’ve grasped the coherence of the building blocks that will sustain their enterprise: To create globally competitive products by being committed toinvestment, technology and innovation, education and training and product and market development. [The aggregate output of goods and services is a nation’s GDP; still, it demands an infrastructure platform. Lagging in basic infrastructure and industrialization and competitiveness and coherence, what’s left for PHL – to be in its default/fire-fighting mode?]

Even my wife could not foresee how this group of young people could do business beyond their town of 80,000 when we first came ten years ago. And much earlier on, I myself couldn’t foresee how China could be the second if not the largest economy when I first came to Guangzhou and saw the factory and offices of my old MNC company’s partners to be. And the “fast train” from Hong Kong taught me that despite their aggressive nature, New Yorkers were civilized train passengers. But in the decade I covered the region, I witnessed how the human spirit could do the unimaginable. The glass office tower was a big step up for our Chinese employees, but the world-class factory that they ably operated – beating the company’s global productivity metrics – was simply amazing. And how proudly the Chinese general manager showed me the factory cafeteria; I had invited him to our Park Avenue (NY) cafeteria before and he promised: “I am taking personal responsibility and you will not be disappointed, we shall meet if not exceed your standards!”

The human spirit doesn’t need forever and a day to demonstrate its magic . . . As our neighbors showed the world how to be economic tigers . . . while we continued to embarrass ourselves . . . “Philippine corruption magnifies effects of typhoon,” Associated Press, 18th Nov 2013. "I'm not going to mince words," said Mel Fernandez, the editorial adviser for the Filipino Migrant News. "We would like every cent to reach those poor people there rather than getting waylaid." Corruption is a concern after any major natural disaster, as millions of dollars in cash and goods rush in from around the world. But those worries are especially acute in the Philippines, where graft has been a part of life for decades.”

Wednesday, November 20, 2013

We need prayers but not only

What would fatalism and a can-do nature have in common? Both are instincts? We've heard about the rigorous training US Navy Seals undergo, for instance; and the value and benefits of such preparation have in fact been translated into a body of knowledge. But it is not uncommon for these individuals to add prayers to the pursuit of their missions. Still, even a priest-columnist in a Philippine daily has said, not once, that faith alone isn’t enough? Beyond faith, where do we want to be? We've relied heavily on prayers while neglecting the demands of nation building? And while it hurts, we haven’t truly developed the instincts – and the resolve – of problem-solving? But because we were once well-trained [but our educational system has since deteriorated?] and in many cases had overseas training, we’ve assumed that we’re pros in problem-solving? Yet the reality in an oligopoly is that the absence of global competition robs us of the kind of rigorous training that the contemporary world demands? That is the curse Juan de la Cruz is yet to open his eyes to?

“And how about our propensity to become overly attached to the past?” [Noreena Hertz, Harvard Business Review, 11th Sept 2013] “You remember how huge Nokia was. From the 1990s onwards, Nokia dominated the mobile phone industry. At its peak the company had a market value of $303 billion and by 2007 around four in 10 handsets bought worldwide were made by Nokia. But when Apple introduced its game changing iPhone in 2007, Nokia was caught sleeping on the job . . . As a former employee working in the development team at the time said of that decision, “Management did the usual. They killed it!”. . . Despite having themselves developed an iPhone-style device . . . some seven years earlier.”

In an earlier blog I talked about the decision-making process; and also my introduction to the headquarters environment of my old MNC company, and it was largely through the enthusiasm with which people embraced problem-solving. It would pump their adrenaline because to them it was fun! And that came with the recognition that something was wrong or a mistake was made in the first place. Is that the big difference with us Pinoys because we would rather sweep a problem under the carpet? Despite the entrepreneurial spirit that was evident, I saw the same instinct – to take a problem for granted – with my friends in Eastern Europe. And so one of the first things they had to learn and embrace was transparency. “The sun must shine on everything we do so that we would see even a potential problem before it bites us!” That was too abstract for them because they were “input-oriented” and were accustomed to accepting whatever came out of the hopper. “Under communist rule we were told what to do and were paid the exact same wages no matter the result. Motivation was foreign, and we lived by the day.”

And one carry-over from the old rule was their accounting system, which was cash as opposed to accrual accounting. “You are deluding yourself if you believe this income statement is reality!” But because of their vision – and desire – to be the best in the business from their part of the world, they have plunged into rigorous training over the last ten years. We Pinoys are far-advanced in the accounting discipline, for example, but does it mean that we’re not deluding ourselves about PHL reality? Didn't we bypass industrialization? Why has no one taken responsibility for our decades-old power crisis? What about a world-class airport? What about even the rudiments of infrastructure? Have we created the PHL tsars given our cacique culture? What about more prayers? Yes, but we mustn’t ignore the overhang of social injustice that is the why of our underdevelopment – like Francis witnessed in Latin America? We’ve been caught in a vicious circle that we see the trees but not the forest?

Indeed we are resilient people as typhoon Yolanda once again confirmed to the amazement of the world. Yet we must constantly guard against complacency given how deep in the hole we are. For example, the folks that thrive in PHL political patronage – thus the restrictive economic provisions of the Constitution, for instance – like it or not must flex their muscles post-Yolanda in the name of Christian charity, reflective of our cacique culture? Translation: the system is rigged which is why we get the least FDIs – and why we’re down deep in the abyss? Is it any wonder why the European Chamber is bugging us even on the less than ideal foreign investment negative list – which will yield sub-optimized outcomes, because we remain “narcissistic” [to borrow from Francis] in our worldview? There is a reason why we're laggards compared to our neighbors, and it is not God-made but man-made or more precisely, Pinoy-made?

Sunday, November 17, 2013

Where we want to be

“Mere recommendations not enough,” wrote Rey Gamboa, The Philippine Star, 12th Nov 2013. “It would seem a waste of time [The 39th Philippine Business Conference] by our business leaders to hunker down and discuss economic and business issues for three days . . . If our business leaders are serious about wanting to see a tiger economy by 2050, it would help to institute follow up measures that would ensure that issues and concerns raised . . . are properly addressed at the soonest possible time. If serious review and follow up are not carried out, for sure this country will never get to where it wants to go.”

“An old issue . . . is the proposal urging the national government to prioritize public and private initiatives to modernize the agricultural and fisheries industry . . . In the area of power, three issues remain outstanding . . . the need to speed up . . . energy and power generation projects . . . to tighten the power program in Mindanao . . . to fast track the establishment of the ancillary reserve market . . . and the mechanism for transparent procurement of ancillary services.” Not surprisingly, in a separate but related challenge, “Phl needs P2.3 T to fix transpo system – JICA” [Philstar.com, 13th Nov 2013.]“JICA project manager Shizuo Iwata said that based on a roadmap prepared by the agency for transport infrastructure development in Metro Manila and surrounding areas, the investment would be used for projects to address the worsening traffic congestion in the area.”

If Mr. Gamboa sounded alarmed, the Manila Bulletin, in its 11th Nov 2013 editorial wasn’t: “Editorial: Agenda for sustained, inclusive growth. The 39th Philippine Business Conference . . . approved a 41-point resolution urging government to ensure that economic growth gets to reach the grassroots to achieve inclusive growth . . . We congratulate the Philippine Chamber of Commerce and Industry . . . in their partnership with government to craft competition policy that will ensure maximum benefits for marginalized people and communities . . .”

Why the contrast in the treatment of one and the same event? There is such a thing as positive reinforcement” – but it is not always a good thing. “Positive reinforcement involves the addition of a reinforcing stimulus following a behavior that makes it more likely that the behavior will occur again in the future. When a favorable outcome, event, or reward occurs after an action, that particular response or behavior will be strengthened.” [Kendra Cherry, About.com] “An important thing to note is that positive reinforcement is not always a good thing. For example, when a child misbehaves . . . some parents might give them extra attention . . . Children quickly learn that by acting out, they can gain attention from the parent . . . Essentially, parents are actually reinforcing the misbehavior. In this case, the better solution would be to use positive reinforcement when the child is actually displaying good behavior.”

Could it be that the Manila Bulletin editorial is acutely aware of the “values that are uniquely and positively Filipino” especially our high “regard for personal honor and dignity” which it editorialized on 31st Oct 2013? “Values are the root of traditions that Filipinos find important in their day-to-day events. They are instilled early in life, are deeply ingrained, and are resistant to change.” On the other hand, Mr. Gamboa raised “old issues” that have remained outstanding; and which is consistent with “the better solution” – and that “would be to use positive reinforcement when individuals are actually displaying good behavior.”

Consider: “Pope Francis doesn’t want cultural warriors, he doesn’t want ideologues. That’s the new paradigm for us, and it’s making many of us think,” said Archbishop Blase J. Cupich of Spokane, Washington. “Bishops Select Two Leaders Who Reflect New Tone Set by Pope” [The New York Times, 12th Nov 2013.] “They voted a day after hearing an address by Archbishop Carlo Maria Viganò, the Vatican’s ambassador, or nuncio, to the United States, who spoke of Francis’ vision for the church . . . The nation’s Roman Catholic bishops on Tuesday chose as leaders of the bishop’s conference two prelates whose pastoral approach evokes the new tone for the church set by Pope Francis.”

If American bishops (and they do have values that are deeply ingrained?) could be made to think because of a new paradigm, what does it say of us Pinoys or what we profess as our values, the root of traditions, deeply ingrained and are resistant to change? The world is not going to wait for us?

Saturday, November 16, 2013

Bondying meets Padre Damaso

Our supposed damaged culture is again in the forefront given the headline-seeking pork scam? But where would it come from? Was it when Padre Damaso met Bondying? Bondying by definition has entitlement at the core of his assumptions and expectations – because he is a weakling? And opposites attract; and so he and the bully, Padre Damaso, were meant for each other? And not surprisingly, Bondying would eventually mirror Padre Damaso? But this is the 21st century; ergo: Juan de la Cruz must once and for all learn to paddle his own canoe?

We must play the cards that we were dealt. Deng Xiaoping faced daunting challenges and had to pick the brains of Lee Kuan Yew and the Malaysians and the Thais; and made China an economic miracle, lifting “hundreds of millions” of Chinese out of poverty! Look who is playing bully today in the region? The Chinese, of course! What to expect from the human condition? They never were shy: We need Western money and technology. Please help us to raise our people from poverty!

Why would we expect everyone and his uncle to then treat Juan de la Cruz like a debutante? We don't even treat our own when they are lower in the totem pole with dignity – they're muchachos and muchachas? I remember explaining to my then new Eastern European friends what their accession to the EU meant. [Today PHL is in a similar boat with ASEAN.] “It will open a bigger market for you but it isn’t going to be a cakewalk. No one will give you a handicap; that is only for amateur golf. You have to learn to give as hard as you take. It is survival of the fittest. It is the law of nature or the law of the jungle if you will. You have to hit every curve ball they throw at you. Everything is fair in love and war.”

“Are we good then to choose to compete against the world's biggest consumer goods company?” That was their response. And with a wide grin, I took my hat off for their daring. But then I said that their concept of what a factory is had to be undone. “Everything has to be a straight line. Recall the definition: the shortest distance between two points is a straight line.” I’ve learned that using high school lingo was the best way to explain efficiency and productivity. On the other hand, to educate the younger generation about what efficiency and productivity isn’t, they should simply observe Metro Manila?

We don’t want to prematurely celebrate our competitiveness rankings or ease of doing business lest we be in the camp of Vladimir Putin – with Russia (# 92) ahead of PHL (# 108) in the rankings? Like PHL, Russia has a structural problem; and that is, the absence of a robust industrial base. In one sense Russia is doing better because it has an industrial base but it is outmoded and inefficient, is not pulling its weight and has attained full capacity and worse, is uncompetitive. Beyond form, substance matters? For example, in the case of PHL, the European Chamber renews call on ownership limits,” Business World, 10th Nov 2013. "It is essential that the Foreign Investment Negative List (FINL) is shortened.” We may see the world as gray but the rest of the world doesn’t? They see our forked tongue – protecting the few while shedding poverty tears.

Very recently, my Eastern European friends presented the plant layout for a new state-of-the-art factory – their fourth factory investment in ten years, that will be up and running in two years. “This is a very simple concept; the shortest distance between two points is a straight line. And even the equipment manufacturer was all praise.” These people think, behave, act and believe they are an MNC; not from the West but from the heart of impoverished Eastern Europe – in a town of 80,000 and a country of less than 7 million. They have gone toe-to-toe with their best Western competition. Yet they are far from perfect; but they have internalized the building blocks of a sustainable economic activity: beyond investment, technology and innovation, education and training and product and market development. [In PHL we feel for agriculture. Still, it is imperative “to start with the end in view,” even in agribusiness. The thinking process must start with the “output,” not the “input” – and to visualize successfully marketing high value-added products, beyond basic produce, to attain sustainability. To simply talk about targeting and focusing on agriculture and rural development is just that, talk?]

We Pinoys have a lot more experience in free enterprise but why are we laggards? It brings to mind “the Philippines’ lead climate negotiator, Nadarev Saño . . . while in Doha: Please, let 2012 be remembered as the year the world found the courage to find the will to take responsibility for the future we want. I ask of all of us here, if not us, then who? If not now, then when? If not here, then where?” [Time magazine, 11th Nov 2013] Shouldn’t we be asking that of ourselves, too? [My family continues to pray with the nation in the aftermath of the storm.]

Monday, November 11, 2013

Where have we been all these years?

“In November 1978, after the country had stabilized following political turmoil, Deng Xiaoping visited Bangkok, Kuala Lumpur and Singapore and met with Prime Minister Lee Kuan Yew, who advised him to open up and institute reforms, as well as to stop exporting Communist ideologies in Southeast Asia. Later, Deng sent tens of thousands of Chinese to Singapore to study . . . Deng opened China to foreign investment . . . [and] the global market . . . He is generally credited with developing China into one of the fastest growing economies in the world for over 30 years and raising the standard of living of hundreds of millions of Chinese.” [Wikipedia]

1978 would seem like a generation ago, and it is. And whose brains did Deng pick – those of our neighbors! But we’ve always assumed that we’re the smartest in the region? Recently former Senator Joker Arroyo explained that President Cory was fortunate to have four Harvard graduates in her cabinet. Given our hierarchical system and structure, we’ve always valued rank and hierarchy, and since we’re the smartest, we simply dismissed our neighbors?

Where have we been all these years? Wrote Andrew James Masigan, Manila Bulletin, 3rd Nov 2013, “PH: An economy in transition. A subsistence economy cannot reach the level of sophistication of OECD nations without first going through industrialization. Neither can it leapfrog from one based on agriculture to one based on high-value services. As we are all too aware, many Filipino economists have suggested that we bypass the industrial phase [please see postscript below] altogether and simply work our way towards being a service-based economy . . . This includes call center, retail and tourism related services. Such has been the case for the Philippines so far . . . [A] strong industrial base is what supports high-value services in the first place. This is because without hands-on experience in a particular technology, there is no way one can become technically proficient in it, let alone render services relating to it. For instance, there is no way Switzerland can be the Invitro Insemination capital of the world if not for its thriving pharmaceutical industry. Similarly, there is no way Japan can be the epicenter of video games programming if it did not have a digital imaging industry to back it up.”

Not surprisingly, “PHL losing out in ASEAN, incurs huge trade deficit,” reads another Manila Bulletin article of the same date. “The Philippines, one of the original ASEAN members, has been on the losing end, consistently incurring huge trade deficits with the region as ASEAN countries export more duty-free products here as against fewer Philippine exports to the region. Based on a recent presentation made by Trade and Industry Undersecretary Adrian S. Cristobal Jr., the Philippines has been incurring huge trade deficits with ASEAN for the past five years. The highest trade deficit was incurred in 2008 with $7.543 billion followed by $5.601 billion in 2011 and $5.124 billion in 2009. Lower trade deficits were incurred in 2012 with $4.307 billion and in 2010 with $3.947 billion.”

And the one conclusion that has already been made for us is: Overall poverty generally unchanged,” reports Business World, 3rd Nov 2013. “A Sept. 20-30 nationwide survey had 50% of the respondents claiming to be ‘mahirap’ or poor, up a point from June’s 49%.” Why? We have a fundamental structural weakness . . . that robust foreign exchange reserves from OFW remittances and stepped up government spending can't overcome, not for many years, until we accelerate infrastructure development and doggedly pursue a few strategic and competitive industries that will deliver and sustain over $100 billion in incremental GDP.

Where have we been all these years? In 1978 Prime Minister Lee Kuan Yew advised Deng Xiaoping to open up and institute reforms. And a generation later,“[T]he Philippines is [still] among the countries with market access and intellectual property issues . . . The [comment] . . . will be included by the USTR (Office of the United States Trade Representative) in its 2014 National Trade Estimate Report on Foreign Trade Barriers (NTE) . . . In [the] 2013 NTE, the USTR said corruption, lack of regulatory transparency, and a cap on foreign ownership remained key concerns for American businesses.” [Business World, 4th Nov 2013]

Will we remain an economy that is in a constant state of transition – if not suspended animation? At the rate we've gone, this generation is already kaput; shall we do it with the next generation as well, and the next? Four generations ago, Rizal foresaw – from his observation, i.e., that we were backward and anti-progress, against what his world was like in Madrid – the future of Juan de la Cruz, and we haven't proven him wrong!

P.S. The foregoing would also explain the motivation behind this blog though I moved overseas about a generation ago, in 1988. First writing to newspapers –to echo the frustrations of family and friends about the state of the economy and PHL affairs in general, which sounded worse every visit: from the apparent hopelessness of NAIA to the primitiveness of Metro Manila thus our resignation to an inefficient and unproductive work day to corruption that has become insidious and a way of life to the impeachment of a president to rising to infamy as a nation by contributing three Filipinos to the select few world's most corrupt leaders to how we have elevated to an art form what New Yorkers rather belated learned and called Occupy Wall Street – and then turning those thoughts into blog postings.

I've been asked if I were an economist. I am not, but I have been involved in the pursuit of economic activity in many parts of the world. For example, I would not imagine prescribing bypassing industrialization. As I explained to my then new Eastern European friends: “We shall make things and sell things, and we must beat the competition before they make us extinct. And bear in mind that competition can come from anywhere in the world.”

The multiplier effect of investment that economics preaches comes alive, beyond being a numbers exercise, in the cycle of making and selling things – not just things per se but globally competitive things, i.e., high-value added, and perceived by consumers to have rational, emotional and experiential value. And thus the linkages that economics talks about are mandatory building blocks of an economy. And which in this blog I’ve talked about: beyond investment, the imperatives are technology and innovation, education and training, and product and market development.

And they generate other subsets of economic activity through the expertise they would spawn – or must, especially a visionary R&D. Or why Edison is considered the father of modern R&D in America: “I want to see a phonograph in every American home.” And carried on by Gates: “I want a computer in every home.” R&D teaches a nation how to be forward-looking, proactive, competitive, dynamic and progressive. But the marriage of technology and marketing was best exemplified by Steve Jobs. What is the lesson for enterprises and even nations? For example, with my Eastern European friends, every business unit has a dedicated R&D and marketing working side-by-side.

The above scenario – which presupposes pulling the requisite building blocks into a coherent whole – won't come about if a nation doesn’t have world-class infrastructure, as a foundation, in the first place. Is that something Deng would have learned a generation ago from Lee Kuan Yew as well as from the Malaysians and the Thais? And the operative word is coherence; which is the essence of what we like to call “inclusive growth” – not the incoherence that characterizes what we call “stimulus” as in DAP or even well-intentioned “regional development” when it fails to meet the fundamental test of the “vital few” or Pareto's 80-20 rule. Unwittingly, we constantly fall into the trap of “crab mentality” – which is our version of socialism? And forgetting that the dark ages of Eastern Europe were courtesy of Soviet socialism, and that they’re still very hard at work undoing it? Because “scarcity of resources,” a fundamental given, is something Juan de la Cruz is yet to internalize – i.e., resources must be efficiently, not “paternally,” employed? And we wonder why corruption is us?

Are we still wondering why Rizal dreaded our being backward and anti-progress? He created Padre Damaso as the poster boy, preceding that of Pope Francis by over 100 years, Ideological Christianity, a narcissist afflicted with leprosy? Sadly, we've kept to our Pinoy assumptions, biases and comfort zone and that backward-looking instinct would rob us of something as fundamental as progress and development? How could we relate to a Francis who is fighting the narcissism and leprosy that he sees in the hierarchical system and structure that is in our veins?  [My family joins the nation in prayers in the aftermath of the storm. 11.9.2013]

Thursday, November 7, 2013

Beyond political patronage and oligopoly

“Government think-tank Philippine Institute for Development Studies (PIDS) has urged for a strong government support . . . to 15 industries to revive the domestic manufacturing sector.” [Manila Bulletin, 2nd Nov 2013] “Other measures needed by domestic industries include consistent set of investment policies for construction, auto appliance, shipbuilding; institutional mechanism to fully integrate copper industry; creation of supply hubs for raw and natural materials for the furniture sector; full integration of industry upstream-mining, reliable supply of iron ore and coal; access to raw material base, development of massive tree plantations and commercial agro forestry integrated with virgin wood pulp production to support the paper industry; and, institutional mechanism to fully integrate the copper industry; access to financing for SMEs.”

“Human resource development programs and skills training were also pushed for design, tool making, prototyping, molding, die and casting for the auto parts sector, chemical engineering, foundry technology, metallurgical engineering, industrial engineering, metal casting and die design industries. In pushing for these government interventions, PIDS . . . cited the sustained industrialization of Thailand program . . . [And] The Thai government invested $1.19 billion in 1997 . . .”

Clearly the recommendation is called for. Yet, as in any major undertakings, discretion is the better part of valor – especially in PHL where we’ve yet to solve our decades-old power problem; and what about getting new cars their proper tags or plates? The Thailand experience happened in 1997 when the world was less global and competitive. [I was then a regional manager in an MNC and we were attracted and thus invested in Thailand; like we did in China, India and Vietnam.] We need to figure out more rigorously, of the 15 industries, which ones will truly generate regionally if not globally competitive products given ASEAN. Having done global business for decades, I have serious doubts we could push 15 industries – we must learn to walk before we can run. Beyond manufacturing as Turkey has learned, for example, is marketing. And even Germany had to learn the lesson! Prioritize . . . and start with the end in view, i.e., define successful outcomes!

Meanwhile, reports The Economist, 19th Oct 2013: How science goes wrong . . . It needs to change itself . . . Modern scientists are doing too much trusting and not enough verifying—to the detriment of the whole of science, and of humanity. Too many of the findings that fill the academic ether are the result of shoddy experiments or poor analysis. A rule of thumb among biotechnology venture-capitalists is that half of published research cannot be replicated. Even that may be optimistic . . . A leading computer scientist frets that three-quarters of papers in his subfield are bunk . . . What a load of rubbish . . .”

It reminds me of the then PhD candidate that I mentored and reading the heap of research materials that she assembled, and “what a load of rubbish”! To a practitioner the materials would read well for classroom purposes but clearly many couldn’t be useful in the real world! And so she had to inject a major dose of qualifications to the discussions on the algorithms, standard in graduate work. “The acid test of this exercise is if your own brand will win in the marketplace,” I stressed to her. To cut a long story short, it did and in no time she was promoted to a regional job and more recently promoted to a headquarters job to lead a global initiative for her brand.

And my Eastern European friends early on chose to compete with Procter & Gamble – and have earned their stripes over the last 10 years. And recently they’ve learned that even icons could miss a beat, which has boosted their confidence: “P&G's marketing efforts have been labeled . . . as “old school” and “too traditional.” In terms of global expansion, P&G's old strategy involved an “all-in” focus on rapid expansion . . . More than 20 of P&G's brands generate $1 billion or more in revenues per year and they are extremely popular . . . These brands are famous for their high quality. However, despite the strength of its portfolio and its presence in more than 180 countries, P&G's performance in global markets is far from amazing.” [The Motley Fool, 27th Oct 2013]

“Colgate-Palmolive's performance in emerging markets has been outstanding. The company now owns 46% of the global oral care market. It's normal for the company to see organic sales rise in the double digits in Asia, Africa and South America. Wide distribution, coverage of rural areas, portfolio expansion and innovation, and strong marketing could be behind Colgate-Palmolive's success story in these economies. Unilever has also taken advantage of emerging economies to boost its revenue. The company not only focuses on creating an efficient global supply chain and distribution network, but also on product localization and non-traditional marketing to achieve its global objectives.”

Global competition is a true test of man's capacity; there’s no hiding behind political patronage and oligopoly! And we won’t get there without world-class infrastructure, and until we figured out the do’s and don’ts of 21st century industrialization – it’s about technology and innovation, education and training and product and market development!

Bourgeois . . . Intelligentsia

They are a couple of sociological terms that define ideological. I've found myself constantly on Google every time there is an article about Pope Francis. And when he said ideological Christianity was an illness, and then came November being “Filipinos Values Month,” the latter would give me pause. We have a Filipinos Values Month; how did it come about? What is the object of the exercise? Since it came from a presidential proclamation back in 1994, it brings President Ramos to mind.

“Political stability, increasing investor confidence, and an improved energy situation fueled renewed economic growth in the Philippines during 1994. President Fidel V. Ramos still faced considerable opposition in his effort to reform the economic and political systems. In the political realm, Ramos continued efforts to overcome the executive-legislative gridlock, negotiate peace with the various rebel groups, and enhance diplomatic and trade relations with Pacific Rim and European countries. In the economic realm, Ramos worked to implement an expanded value-added tax (VAT), increase market competition, further the privatization of public enterprises, and complete the construction of new energy-production facilities.” [The Philippines in 1994: Renewed Growth and Contested Reforms, Jeffrey Riedinger, 1995, p 209; University of California Press]

“The autonomy and capacity of the Philippine state are constrained by elite penetration of the state and the exclusionary nature of Philippine democracy. Political dynasties are a continuing feature of Philippine politics. Two-thirds of the members of the House of Representatives have at least one close relative in public office, and virtually all members of the Senate have multiple relatives in elective and appointive government positions. The 1987 Constitution directs the state to prohibit “political dynasties” but the Congress had failed to enact such legislation . . . The state is also limited by a weak party system and President's Ramos inability to fashion a reliable working majority in the Congress. The leading parties are personality-based coalitions of politicians with independent power bases.”

Back to the Values Month: “It seeks to promote greater consciousness of values that are uniquely and positively Filipino – love of God and country, strong family ties, care and respect for elders, diligence, patience, loyalty, hospitality, bayanihan, generosity, regard for personal honor and dignity.” [Manila Bulletin, 31st Oct 2013] “Values are the root of traditions that Filipinos find important in their day-to-day events. They are instilled early in life, are deeply ingrained, and are resistant to change. They are developed from people's direct experiences with others who are important to them, such as parents, teachers, friends and classmates.”

What conclusion can be drawn from that exposition of our supposed values? While it starts with the truly positive love of God and country, it also offers a window to the reality of Juan de la Cruz? Why are we economic laggards and despite pervasive poverty why haven't we changed our worldview – because it is deeply ingrained and resistant to change? It likewise confirms why 178 political dynasties dominate 73 out of 80 provinces? And while dynasties have family members at their core (to be expected given our strong family ties?) they are preserved, protected and defended by friends, classmates and cronies as we witnessed with Marcos, Estrada and Arroyo, among others?

But high-ranking officials are elders – even when they are “diligent” in mismanaging government and misappropriating taxpayers' money – and so Juan de la Cruz must remain patient and loyal? Is it a surprise if the elite class promotes these supposed values? And could they mirror the ideological Christianity that Francis has indicted and denounced as an illness? And not to mince words, he called them narcissists and suffering from leprosy? And he didn't spare the Vatican Bank, which recently had to go public to satisfy global transparency norms. Bank regulators had for a long time been frustrated by the secrecy of the bank especially as the church had to settle large judicial judgments from sexual abuse cases – even to the point of declaring bankruptcy in specific cases. And so a US cardinal proudly defended shielding church funds from these law suits. [How different is that from hierarchical PHL? The absence of transparency gives individuals, including cardinals, license to transgress?] But Francis had to put his foot down and mandated transparency; that the church, while an elder in the eyes of the faithful, is not above the law.

And who else benefits from a cacique-like hierarchical system and structure? Francis calls them savage capitalists! And in the case of PHL, 40 families control up to 76% of the economy. And because our “values” are deeply ingrained and are resistant to change, we are simply doomed? Where is Philippine media? Or is it in fact a bigger problem, a social cancer, as Rizal called it – because growth and economic development means embracing progress, and demands facing and responding to the challenge of change? Yet we see change as going against the grain?

We're not the only ones bound to fail – with Juan de la Cruz – is Francis bound to fail, too? Because our ideology is deeply ingrained and resistant to change, Padre Damaso is our model not Francis? Rizal was truly prescient, over 100 years ago he saw us as backward and anti-progress! Where is the supposed love of God and country in a value system that is skewed to perpetuate the few?

Monday, November 4, 2013

Create and spread wealth

That is what PHL needs to do. Underdevelopment means poverty. The world has drastically reduced poverty as country after country succeeded in economic development. In PHL, we've been addressing poverty for decades – while ignoring the fundamentals of economic development! In the vernacular, we're "puro daldal, satsat, sitsit." As Deng Xiaoping put it, we need to make the country rich and strong. Sadly, we’re again stuck and this time debating pork. People Power against pork or do we vote every legislator out in the next elections? But are we again in a reactive mode? In the private sector they recognize such a challenge and thus they are tactical (addressing the short-term) on the one hand and being strategic (addressing the long-term) on the other. The administration keeps talking about DAP as an economic stimulus. It’s like saying hungry Filipinos need CCT. CCT is not a stimulus; it is to keep body and soul together. What an underdeveloped economy needs are fundamental building blocks, not stimulus. Politicians like it for “pa-pogi” points. But the science of compassion, as in CCT, says that it has no connection with outcomes – like poverty. Yet it triggers the brain akin to indulging in chocolate or sex or falling in love! And in PHL, it's also a natural spring not of water but of corruption!

We can take out pork – via people power – or boot out every legislator in the next elections, but that doesn’t change Juan de la Cruz? In a democracy we get the leadership that we deserve: a high-handed master because our paternalism says we're a bunch of"Bondyings”? “The ill-fitting political system lifted from the American model is not conducive to good governance in a Filipino setting,” says an opinion writer. Indeed political maturity is a requisite in a democracy. We haven't learned to say no; and we expect our leaders not to say no, either? We have yet to internalize transparency, for example. It is likewise the foundation of meritocracy – or why political patronage thrives in PHL? It’s no different from what has happened in Iraq, Afghanistan, Libya, Egypt, etc. But then again, why are there Asian Tigers?

In this blog I shared about being a lazy thus a mediocre student for the longest time to the frustration of my parents. Students like nations can be mediocre. I know about being mediocre, and as a nation we are! Mediocre for a nation is to take the easy way by promoting the pursuit of the low-hanging fruit, i.e., OFW remittances and BPOs, instead of rapidly developing our infrastructure and pursuing industrialization like our neighbors did? Mediocre is to stay in the comforts of the past (which brings about obsolescence) instead of facing and responding to the challenge of the future? That is the simplest definition of development – as in economic development? It demands lots of work. It demands maturity. And worse is to assume “Pinoy abilidad” and reinvent the wheel instead of learning from our neighbors, for example? Lee Kuan Yew and Mahathir, respectively, gave us the simple formula – be disciplined, don’t love the West but embrace their wealth and technology – but we’re smart and wanted complexity, i.e., corruption? In the meantime APEC countries won’t treat us like a debutante, and instead we must expect the big guys to bully us! We can't be Bondyings; we must behave like their equals. And that means we trade what we produce, and we get the short end of the stick if all we offer are natural resources and intermediate products – as in 3 of our neighbors dominating trade to the extent of 70%!

And we’re offended by foreign films depicting PHL as the pits? Marcos, Estrada, Arroyo, the 178 political dynasties that dominate 73 out of 80 provinces and the 40 families that control up to 76% of PHL economy are why we are the pits? And we think our CB patting ourselves on the back given our foreign exchange reserves (courtesy of OFWs) is the true picture? That positive picture comes from the financial services sector (i.e., credit rating agencies and banks) in the US, where the largest bank is reported to settle the multiple charges against them to the tune of $13 billion, and counting. This is the same sector that brought the Great Recession to the 21st century. Ergo, finance like any other resource must be utilized for productive pursuits, not financial mumbo jumbo. In private-sector lingo, what PHL needs is a restructuring! But as my maternal grandfather [May he rest in peace!] would say, “Where is our backbone?”

How do we create and spread wealth? Not by compassion but by being smart in the pursuit of economic development. We started well ahead of our neighbors down that road – granted, courtesy of our relationship with the US – but just like what the world has seen in Iraq, Afghanistan, Libya, Egypt, etc., local lords took over the role of colonial masters? What an insult?

Saturday, November 2, 2013

Where is PHL, really?

If the track record of science is suspect (in generating knowledge) and if even the Vatican could be stirred into an upheaval by the pope himself (for its narcissism), what about an economic laggard and poverty-stricken nation like PHL (that appears frozen in time)? Where are we, really? Or is it what are we? 

We are considered the most unequal with the widest gap between rich and poor in the region. And that is reflective of the reality that in a 100 million-strong nation 40 families control up to 76% of PHL economy and 178 political dynasties dominate 73 out of 80 provinces. Ergo: We are centuries behind the times, whatever positives Juan de is Cruz is told aren't representative of his reality? Where is Philippine media?

Beyond the church, the school is likewise in turmoil given the sinking rankings of our universities compared to the rest of the world? The same could be said of the public sector – or are they in fact worse – given the corruption across the board or is it laterally and vertically? And the private sector has ceded 70% of regional trade to 3 of our neighbors – because beyond manufacturing, we have been left behind in investment, in technology and innovation as well as in product and market development?

How could we be so economically and commercially trade uncompetitive on the one hand and celebrating oligopoly on the other? Of course even the US is under the thumb of industry and Wall Street. And so there's a breath of fresh air with the news that its largest bank, JPMorgan, is to settle its numerous charges to the tune of $13 billion, and counting. And others in their industry are under scrutiny?

Where is PHL really? Cursing Manila traffic or NAIA or the absence of basic infrastructure speaks volumes about Juan de la Cruz? To add insult to injury, we're proudly trumpeting our PPP as a model for APEC countries – when Metro Manila made it to the world map because of the 'gates of hell'? [Our infrastructure deficit is not about to ebb especially when our neighbors aren’t standing still.] Do we know where we're going to recognize if we're coming or going? What about distinguishing the tactical from the strategic and the "vital few" versus the "trivial many"?

So our electronics industry which just revealed the truth about lower exports numbers for 2013 are looking at making PHL a major player down the road? With a big qualification, of course: if government would support the industry starting with our uncompetitive power situation. And the tourism industry is singing a similar tune – we can't meet our targets if government support (e.g., infrastructure) isn't forthcoming?

If Pope Francis calls ideological Christianity “an illness” what do we call our continued failings? How do we put two and two together – so that our universities don't rank as badly as our economy and our competitiveness? Just like transparency, competitiveness is a value. A nation that is addressing “competitiveness” at the intellectual level – e.g., via the ratings and rankings from international agencies – is akin to a learner that is still at the cognitive stage, and is ways away from expertise? The fact that we’ve been debating the restrictive economic provisions of the Constitution for the longest time means that we don’t value competitiveness? And the same is true with transparency; the fact that we’ve been debating the FOI for the longest time says that we don’t value transparency?

Conversely, these debates confirm what we truly value – PHL's long-entrenched oligopoly and hierarchical system and structure yet our so called pillars of industry have rendered us regionally and globally uncompetitive – that finds deeper expression in the tyranny and corruption that have defined our way of life? How could Juan de la Cruz figure that out if the beliefs that we hold dear are completely at odds with civilized, just, equal and egalitarian societies? A columnist asked if we are simply corrupt. Man is constantly confronted with the choice between good and evil, and which is why civilized, just, equal and egalitarian societies value the rule of law! And Juan de la Cruz holds the secret in his hands. And it really is simple. Do we want to be a civilized people? Do we want to be a just, equal and an egalitarian society? Unfortunately, we can’t simply answer that because we value rank – because rank has its privileges?

Friday, November 1, 2013

The decision-making process

If science could go wrong [How science goes wrong, The Economist, 19th Oct 2013] despite the rigors we associate with it, what more of the decision-making process that goes on in every human endeavor? How we perceive, analyze and finally make up our minds is a fascinating journey. And three recent articles would speak to this preoccupation: (a) Why we make bad decisions, Noreena Hertz, The New York Times, 19th Oct; (b) The psychology of getting unstuck, Brain Pickings, 20th Oct; (c) Three cognitive traps that stifle global innovation, Harvard Business Review, 18th Oct 2013.

"I was struck down with a mystery illness . . . I saw doctors in London, New York, Minnesota and Chicago . . . [And] faced all these confusing and conflicting opinions . . . As an economist . . . I have spent most of my career helping others make big decisions – prime ministers, presidents and chief executives . . . But up until then I hadn't thought much about the process of decision-making . . . I dove into the . . . literature on decision-making . . . Not just in my field but also in neuroscience, psychology, sociology, information science, political science and history . . . Physicians do get things wrong, remarkably often . . . It is crucial to ask probing questions not only of the experts but of ourselves. This is because we bring into our decision-making process flaws and errors of our own. All of us show bias when it comes to what information we take in. We typically focus on anything that agrees with the outcome that we want . . . We need to be aware of our natural born optimism, for that harms good decision making, too . . . We need to acknowledge our tendency to incorrectly process challenging news and actively push ourselves to hear the bad as well as the good . . . When we find data that support our hopes we appear to get a dopamine rush similar to the one that we get if we eat chocolate, have sex or fall in love . . ." [Why we make bad decisions, Noreena Hertz, The New York Times, 19th Oct]

"As a task becomes automated, the parts of the brain involved in conscious reasoning become less active and other parts of the brain take over. This is the "OK Plateau," the point at which you decide you're OK with how good you are at something, turn on autopilot, and stop improving. Early psychologists used to believe that the OK Plateau signified the upper limit of one's innate capacity – in other words, they thought the best we can do is the best we could do. But Florida State University's Anders Ericsson and his team of performance psychologists, who have studied the phenomenon closely, found that the single most important factor for overcoming the OK Plateau to become truly exceptional at a skill is the same thing that turned young Mozart into a genius and that drives successful authors to their rigorous routines. What separates experts from us is that they tend to engage in a very directed, very focused routine, which Ericsson has labeled "deliberate practice." [The psychology of getting unstuck, Brain Pickings, 20th Oct]

"How do you think people in another country live? Picture this to yourself. Then search "A typical day in the life of a (enter nationality here)," that country's World Bank Country Profile, and their leading local newspaper. Read the three top search results of each carefully. If the results are far removed from what you visualized earlier, you probably suffer from availability bias . . . When we hold a hypothesis passionately and are confronted with ambiguous information, we latch on to anything consistent with our original hypothesis . . . Can you remember the last time you were surprised by a piece of new information – and changed your mind as a result? If not, you might be trapped in confirmation bias . . . In the variance bias, we see fine-grained differences in groups we identify with, but underestimate variance in distant cultures. We've seen Americans who think that New Yorkers and Californians as dramatically different but then talk about Indians as if they can be seen as a unified whole." [Three cognitive traps the stifle global innovation, Harvard Business Review, 18th Oct]

Having lived and worked with different nationalities, I’ve concluded that while people are different, how we make up our minds is not at all that different. Our biases, comfort zones and assumptions would explain why we make up our minds the way we do. And that observation has been reinforced by the last ten years where I've lived and worked with my Eastern European friends. I anticipated that while they would not readily embrace the unfamiliar, they’d eventually come around to understand and accept things that were once foreign. The key was that there was a commonality in the way we both viewed their future: to attain a certain degree of sustainable success in the business they had chosen. And the leadership of the organization was their biggest inspiration. If Deng Xiaoping could lead a billion Chinese to embrace things that were once foreign, my friends in a once small enterprise in the middle of nowhere in Bulgaria could do it.

Very early in our association, they’d pump me for "the rules of free enterprise.” But instead I would get into discussing principles to keep in mind and lacing them with stories about Western companies and brands familiar to them. And soon the realization came . . . These principles must in fact be the pillars of the organization: vision-driven, transparent, focused and disciplined. But that said, people's biases, comfort zones and assumptions would keep revealing themselves. The good news is given how far the organization has progressed, the more my friends are better able to accept things that were once foreign. Ergo: the best is yet to come for these folks in a nation that was once a Soviet satellite state.

What about PHL, will we find a Deng Xiaoping among 100 million Pinoys? Will he or she be able to lead PHL to challenge our biases, comfort zones and assumptions? Will Francis inspire Juan de la Cruz and/or the PHL church hierarchy to challenge our hierarchical system and structure? It is at the root of the paternalism that we expect from our leaders, and thus together we’ve trampled transparency, pushing Juan de la Cruz to subservience while reinforcing our cacique, tyrannical and corrupt culture – and perpetuating our inward-looking and parochial bias?