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]

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