Friday, January 24, 2014

A straightforward approach to attract FDI

How we do it in PHL (for example with EPIRA) versus how Malaysia (with auto investment) is doing it says it all?

“Why Pippa members love the EPIRA . . . EPIRA was enacted to foster competition and give the best deals to electricity consumers. More than a decade after its enactment, however, our woes are getting worse, and the players in the power sector are limited to an elite few . . . We have to plug the loopholes in the EPIRA and redirect the law to the original intention of its framers . . . Under Section 6 of the EPIRA [power generators] are not classified as public utilities [and are not] officially answerable to the Energy Regulatory Commission . . . The country's power generators never had it so good . . . It's a beautiful law, one made in heaven . . .” [Butch del Castillo, Omerta, Business Mirror, 20th Jan 2014]

“Wanted: true competition in power . . . EPIRA was intended to privatize the power industry, foster competition therein, and bring down electricity prices as end result. Twelve years since its enactment, only the first of the three has occurred . . . For competition to be effective, there must be effective control over either the generation or distribution sides of the power market . . . Competition is what drives the economy to efficiency and improve consumer welfare . . .” [Cielito F. Habito, No Free Lunch, Philippine Daily Inquirer, 20th Jan 2014]

Contrast how we do it in PHL with: “Malaysia eases rules to lure auto foreign investments . . . Malaysia relaxed restrictions on foreign automakers manufacturing small and eco-friendly passenger vehicles as Southeast Asia's third-largest economy competes with Thailand for investments.” [Chong Pooi Koon and Manirajan Ramasamy,, 20th Jan 2014]

“Malaysia will selectively seek foreign investments that bring advanced technology and offer customized incentives to attract companies . . . This is a big deal because previously we didn't issue any licenses for the manufacture of small cars . . . Effective immediately, the new policy further opens up the national maker Proton . . . to foreign competition . . .

“Malaysia wants to position itself as a manufacturing hub for energy-efficient vehicles to differentiate the country from Thailand, where foreign automakers have invested to produce pick-up trucks and other vehicles . . . By focusing on energy-efficient vehicles, we are also at the same time making Malaysia a center of excellence for technology.

“Vehicle prices may fall in Malaysia by as much as 30 percent by the end of 2018 as a result of local production by global automakers and other government incentives . . . Sales of passenger and commercial vehicles rose 4.9 percent to 595,300 units in the 11 months ended November . . . That's faster than the 2.7 percent pace in the year-earlier period. The government is seeking to attract automakers that have yet to establish major manufacturing facilities in Southeast Asia for passenger cars, including Volkswagen, Renault, Hyundai, Fiat and some Chinese companies.”

Wow! That is the kind of thought process one would read in the Harvard Business Review or a Fortune 500 company's business-review minutes. It reveals decades of experience in successful global competition. It is real-world expertise that cannot be gained overnight. Put another way, even Steve Jobs fumbled and failed early in the life of Apple. [And he would share his lesson on the imperative of focus with the folks at Google. Translation: road maps are not the be-all and end-all nor can they guarantee success – i.e., experience has taught successful global companies to focus on the vital few (i.e., Pareto’s 80-20 rule) while being dogged and uncompromising in execution – and learn from the experience. It is not about the more the merrier – a.k.a. “crab mentality”?]

The Malaysians’ bias for investment is absolute and unmistakable, not iffy and tentative. It is not parochial but instead exposes a local enterprise – Proton, Malaysia's pride and joy – to foreign competition. It is characterized by the imperatives of 21st century global competition – i.e., technology, innovation, product development, among others – that will command a market – with a clearly differentiated product portfolio – and generate a surplus given economies of scale and pricing advantage.

The bottom line: They have clearly defined and articulated their journey – from where they are to where they want to be and, as importantly, how they will get there.

And where are we? “In the Luzon grid, the top two [power generators] own 50 percent and 30 percent of total installed capacity, respectively. Meanwhile Meralco controls 71 percent of the distribution capacity . . . Lack [of competition] leads to excessive unearned profits accruing to a few at the expense of the many (that is, we consumers.)” [Cielito F. Habito, No Free Lunch, Philippine Daily Inquirer, 20th Jan 2014]

Put another way, we are like school kids ruled by the class bullies in contrast to the Malaysians that are seasoned global competitors (e.g., Proton) in league with global behemoths (e.g., Volkswagen, Renault, Hyundai, Fiat, etc.)

It wouldn't surprise Rizal, he who saw that Juan de la Cruz, over a hundred years ago, was backward and anti-progress? And it isn't surprising why today Malaysia, together with Thailand and Singapore, control 70% of regional trade! And we still believe to be parochial and in bed with oligarchy is a virtue – as in love of country? We are underdeveloped and impoverished for a reason? And it is right there when Juan de la Cruz looks in the mirror?

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